Mortgage rates remain steady despite Canada-U.S. trade tensions

By the Editorial Team · Friday, August 28, 2026

Despite rising trade tensions and newly imposed tariffs between Canada and the United States, Canadian mortgage rates have remained stable with bond yields and interest rate expectations largely unchanged. This steadiness reflects market views that the tariff escalation is temporary, though rates could move lower or higher depending on future trade developments and the Bank of Canada's upcoming policy decisions.

Despite escalating trade tensions between Canada and the United States, mortgage rates in Canada have remained largely stable. Following a breakdown in trade negotiations last week and the announcement of new tariffs by both countries, bond yields—which largely influence fixed mortgage rates—and market expectations regarding Bank of Canada (BoC) interest rate decisions that impact variable mortgage rates showed little change.

Markets continue to anticipate a potential rate increase later this year, with bond yields holding at elevated levels. This environment keeps the lowest five-year fixed mortgage rates above 4 percent. The stability comes despite concerns that an intensifying trade dispute could weigh on the Canadian economy in the coming months, potentially pushing fixed and variable mortgage rates lower as bond yields and central bank rates might drop.

Benjamin Tal, deputy chief economist at the Canadian Imperial Bank of Commerce (CIBC), noted that investors appear to view the recent tariff escalations as short-term maneuvering rather than the onset of a prolonged trade war. “At this point the market isn’t convinced at all that we’re in a full-scale trade war,” Tal said, emphasizing that the current market calm could change if a deal is not reached by September 8. On that date, Canada plans to implement countertariffs of up to 50 percent on a variety of American goods.

Market instruments such as bond swaps, which reflect investor predictions about BoC policy moves, currently price in multiple interest rate hikes by early 2027. However, Tal acknowledged that the Bank of Canada might hold rates steady if the trade conflict worsens, and there could even be room for rate cuts should tariffs continue to increase.

The central bank’s next interest rate decision is scheduled for Wednesday. Analysts widely expect the BoC to maintain current rates to better assess the economic impact of the developing trade dispute. Many observers note that the situation remains highly fluid and that market conditions could shift significantly in the coming weeks depending on developments in trade negotiations and tariff enforcement.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.