Canada’s housing and mortgage markets are continuing to thaw slowly as homebuyers and owners adjust to the lingering threat of economic uncertainty and tariff turmoil – and that’s a scenario many mortgage professionals would have gladly accepted when the trade chaos emerged earlier in the year.
US president Donald Trump’s announcement of a wave of new levies on Canadian imports shortly after taking office sparked fears of a sharp economic downturn in Canada and raised the prospect of mass layoffs across tariff-impacted sectors.
But so far, US trade measures against Canada have been blunted by exemptions on CUSMA (Canada-US-Mexico Agreement)-compliant products, leaving the economic outlook “little changed” according to Royal Bank of Canada (RBC).
Canadian countermeasures against the US also stoked concern about a potential inflationary uptick – but the consumer price index (CPI) fell in July, Statistics Canada said on Tuesday, raising hopes that the Bank of Canada could consider lowering interest rates next month.
And with national home sales continuing to post a modest recovery last month, things could be trending in the right direction for the housing market – even if most economists are highlighting the regional disparities at play in its performance.
Market watchers look on the bright side despite stubborn rates
Mortgage lenders and brokers are taking a measured approach amid those conflicting signals. “The 2025 market has been defined by cautious optimism,” Aaron Duhra (pictured top), PHL Capital Corp’s vice president of sales and origination, told Canadian Mortgage Professional.
“After a prolonged period of rate uncertainty, we’ve started to see some signs of stabilization – though not necessarily the sharp rate drops many were hoping for.”
The Bank of Canada has left rates unchanged in each of its last three decisions while fixed rates have seen little relief in recent weeks as five-year Government of Canada bond yields inched higher.
What’s more, plenty of borrowers are continuing to encounter challenges qualifying for conventional lending solutions, leading many to gravitate toward other options. “Credit remains tight and borrower qualification with traditional lenders is still a challenge,” Duhra said.
“That said, we’ve seen a strong demand for alternative solutions as traditional lending continues to contract. It’s a market that rewards discipline, speed, and flexibility.”
Ongoing trade uncertainty likely to keep a lid on housing market
The bad news for the economic outlook is that while the US-Canada dispute has yet to spill over into the prolonged, full-blown trade war many feared, there’s still no sign of a resolution.
Negotiations between both sides are rumbling on, but there’s little clarity on how close an agreement is – and whether Canada can avert a further weakening of the economy in the long run.
Still, with housing activity improving for a fourth consecutive month in July, and brokers continuing to report reasonably robust refinance and renewal business, the mortgage market isn’t freezing up anytime soon.
Scotiabank analyst Patrick Perrier even suggested the recent pace of market activity was similar to how it might have looked without the tariff spat. “While potentially too soon to claim this recovery will be sustained, it is nevertheless consistent with what we would expect in a world without the elevated uncertainty from global trade tensions triggered by the new US administration since its election,” he wrote in a recent analysis.
The curveball in the outlook for Canada’s economy and housing market is the chance that Trump might unexpectedly escalate the trade war and ramp up levies against Canadian goods. “Any increase in trade tensions could further delay this recovery or even reverse it,” Perrier said.
Nonetheless, Duhra said prospects are still positive despite the unpredictability of the news cycle. “I’d just emphasize that while the headlines can sometimes feel negative, we’re still seeing strong activity in the alternative space,” he said.
“There’s a real need for what we do, and brokers play a critical role in helping clients access the right solutions. If we stay disciplined, collaborative, and forward-looking, I believe we’ll all come out stronger on the other side of this cycle.”
CMP
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