Positive remarks by Prime Minister Carney and President Trump have fuelled talk of a deal, potentially brightening the mortgage outlook
Formal talks between Canada and the US on a resolution to the tariff war could begin soon after prime minister Mark Carney’s Sunday social media post describing a productive recent discussion on the issue with US president Donald Trump.
Trade tensions have weighed against Canada’s economic outlook since the beginning of last year and emerged as a significant factor in the housing market’s continued malaise, pushing plenty of potential homebuyers to the sidelines and damaging consumer confidence.
While discussions between US and Canadian negotiators have yet to resume, a positive resolution to the trade war could have big implications for the national housing market.
Prospects for a 2027 recovery, some mortgage professionals say, could hinge massively on whether tariff tensions ease.
And Canada Mortgage and Housing Corporation (CMHC) has highlighted how the trade war is worsening the mortgage strain for many borrowers in tariff-impacted parts of the country such as Southern Ontario, which has borne the brunt of US levies on steel, aluminum, automotive vehicles and parts, and agricultural products.
With homebuilding also taking a hit, the national housing agency’s deputy chief economist Aled ab Iorwerth (pictured top) told Canadian Mortgage Professional a swift end to the trade war could potentially improve the currently dire construction outlook.
“I’m a little bit concerned on the housing supply situation that higher interest rates are affecting developers,” he said. “Now on that side, if the situation were resolved, then maybe developers would have a lot more confidence in home construction.
“From a long-term affordability [perspective], that would be positive. I think if the overall uncertainty lowered… it would give renewed confidence to people who want to go out and buy a home. If you knew the dispute was over, I think that greater certainty would help the overall economy.”
Leaders’ comments suggest potential relief for borrowers ahead
Last week, Trump told a rally in Michigan that the trade war could be settled “pretty soon,” as he stepped up campaigning ahead of the crucial midterm elections, set to take place on November 3.
Trump and Carney’s recent statements mark the first hint of a possible détente since an end to tariff negotiations in August triggered a sudden escalation in the trade war.
Ab Iorwerth said the ongoing trade war is part of the reason mortgage strain seems worse in Southern Ontario than other parts of the country, even though there’s no sign of a wider mortgage meltdown caused by rising arrears.
“There’s a lot of protection within the system so I don’t think we’re looking at a systemic issue, but there’s a lot of people being adversely impacted by what’s happening to them individually,” he said. “And I think a lot of households are facing challenges with these higher interest rates that they’re bearing and the uncertainty over the trajectory of mortgage rates.
“There’s still that lingering concern over inflation and then there’s uncertainty on the macroeconomic front with trade. So I think all of this is creating a lot of stress for individual households about what might happen.”
Iran and inflation add further complications for housing
While tariffs were the defining story of 2025 for the Canadian economy, they’ve been joined this year by surging fuel prices because of the war in Iran – another curveball that could complicate the picture even if the trade war ends.
Those higher fuel prices have sparked fears of a wider spillover into headline inflation, one of the main reasons the Bank of Canada opted to hike its benchmark interest rate last week for the first time in over three years.
Against that backdrop, the central bank doesn’t see the housing market bouncing back in 2027 – although it underlined the positive effects an end to the trade war could potentially have.
A Canada-US deal reducing tariffs “would increase exports and business investment, boosting employment and incomes,” the BoC said in its latest Monetary Policy Report. “Higher demand could increase the pass-through from higher energy prices. The removal of counter-tariffs would provide an offset.”
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
