That wavy-haired factor? Yeah, it’s messing with mortgage math again.
With Trump calling the trade shots and unsettling Canada's economy as he goes — should you go variable, 3-year fixed, or 5-year fixed for your mortgage term?
Amid all this economic upheaval from Trump's trade agenda, are you struggling to land on your ideal mortgage term and rate choice?
Choosing between a variable, 3-year, or 5-year term isn't just about your best interest rates — it's about how much flexibility or certainty you want over the next few years.
With less than 4 years left in Trump's term, here's a practical way to look at your choices to help get you through these uncertain times with (mortgage savings) confidence.
With U.S. President Trump's return to office, many Canadians are weighing their mortgage rate options in light of the years he has left in his current term — less than 4 years.
Trump has already proven unpredictable and willing to disrupt established trade agreements and long-standing business and diplomatic ties over his economic vision. Hence, there is concern that Trump's decisions could result in more interest rate volatility during his reign.
If you're looking for a mortgage, you have options.
Depending on the lender, you can often choose fixed-rate terms from 6 months to 5 years (or sometimes longer, like 7 or 10 years, though these aren't even plottable on a popularity map).
Variable rates, in contrast to fixed rates, are usually only offered for a 5-year term, though a lender may make an exception for a 1- or 3-year variable term (for example, when breaking a fixed term and setting up a variable for the remaining time).
The rate type you choose, fixed or variable, can see your rate and payment stay the same over your term or change along with prime rate changes (variable rates are set by the light of BoC interest rate announcements 8 times a year).
Most of 'it' means Trump's remaining term.
With a 3-year fixed-rate choice, you would have rate and payment stability while markets try to work out their response to Trump's policies, including his global trade war. It would allow time for consumer, business, government, and world economic results to clock in.
If trade disruption sparks a recession in Canada, rates may fall and remain low in time for your renewal. However, Trump's tariff stance may also raise inflation, which may eventually provoke interest rate hikes.
Also, within those 3 years, Trump may need to re-evaluate his unorthodox policies if an upcoming election jeopardizes his political party and enact changes that could stabilize market mayhem.
Your renewal timing would then come to a resting point before more potential political (and rate market) upheaval with the next U.S. election.
👉 The bottom line is that with a 3-year term, you'd avoid any rate volatility for a substantial period. Your next term and rate decision could come at a time when economic disruption may have already come and gone.
A 5-year fixed-rate mortgage lets you lock in your rate and ride out whatever Trumpian headlines come your way to land squarely about one year into the next U.S. Presidential term.
You won't need to think about renewing until after the dust settles from Trump's current term. And you'll have peace of mind and protection from any potential rate hikes.
👉 So, if you're looking for more certainty and less drama in these rocky times, this term choice might be your most comfortable bet.
A variable-rate mortgage keeps your savings options open and lets you take advantage if rates do shift down further — which could happen if the current trade turmoil sends Canada into a recession.
Instead of locking in a rate, you stay agile, ready to benefit from more budget room if rates dip, assuming you have floating payments (an ARM).
If you have fixed variable payments (a VRM through a big bank), your amortization shrinks with every interest rate cut as more of your payment goes toward your mortgage principal.
Does it look like interest rates are about to climb? You can always switch into a fixed rate with no penalty (most variable mortgages have this feature).
In fact, riding a variable rate now may allow you to lock into a lower fixed rate later if you feel that interest rates have room to decline. This strategy, however, would require a close watch of the markets (and perhaps the help of an expert mortgage broker) to make a budget-savvy switch to a fixed term.
👉 If you're comfortable monitoring the market and can handle a bit of fluctuation, a variable rate could be the right mortgage savings solution during these tumultuous years.
It's more important than ever to feel confident about your mortgage decisions, preferably with help from an expert mortgage broker who can shop the lenders for the best rate and term for your unique situation.
Whether you're buying a home soon, selling, or need to renew your mortgage, professional advice from a trusted source (like your Realtor® and expert mortgage broker) can help see you through this market turmoil with a stress-free process that saves you time, money, and stress.
