How Trump’s Tariffs and Rate Cuts Impact Your Investment Clients’ Mortgage Strategy

Key Developments Impacting Your Clients

The Bank of Canada (BoC) recently lowered its policy rate by 0.25%, bringing it to 3.00%, signalling a shift toward easing monetary policy. While this initially seemed like good news for borrowers, the market is now facing a new wave of volatility. US President Donald Trump’s 25% tariffs on Canadian imports (10% on energy) may spark a full-blown trade war.

Canada is set to retaliate if the US implements tariffs when the 30-day period expires. This has put corporate Canada, financial markets, and everyday investors on edge.

For financial advisors, these developments directly impact how mortgage strategies should be integrated into a client’s overall investment and wealth plan. The rising uncertainty in the fixed-income market, inflation risks, and potential rate cuts to 1.5% by October all call for a proactive mortgage and investment strategy that aligns with portfolio diversification, tax efficiency, and long-term financial goals.

How This Impacts Investment Clients’ Mortgages and Wealth Planning

Interest Rate Cuts Affect Portfolio Income and Borrowing Power

• The recent BoC rate cut and expected future cuts will reduce returns on fixed-income investments, meaning investment clients relying on bonds, GICs, and dividend-heavy portfolios may see lower yields.
• At the same time, lower mortgage rates can increase borrowing power, allowing high-net-worth (HNW) clients to strategically use leverage through home equity lines of credit (HELOCs) or refinancing investment properties.
• Advisory Insight: Reassess client mortgage structures in relation to fixed-income holdings—if their investment portfolio is losing yield, leveraging lower borrowing costs could be a tax-efficient way to maintain cash flow.

Fixed vs. Variable: How Rate Volatility Impacts Mortgage Selection for Investors

• Canadian 5-year bond yields dropped sharply on Monday but rebounded Tuesday, showing how quickly markets price in uncertainty and then shift focus.
• Fixed mortgage rates are declining, with major lenders offering 5-year fixed rates close to 4%, whereas nesto has been below 4% since Monday.
• Variable mortgage rates still hold a strategic advantage over time, as forward rate bond markets anticipate further BoC cuts to counter economic headwinds.
• Advisory Insight: Clients with investment properties or cash flow-based financial plans should assess whether a variable mortgage aligns with their risk appetite and investment horizon.

Inflation, Currency Risks, and Their Effect on Real Estate Portfolios

• The BoC expects tariffs to drive inflation from 2% to a projected 2.7%. Thus, clients with real estate holdings need to prepare for rising material and construction costs, which could slow new developments.
• The Canadian dollar is expected to weaken, which can be a double-edged sword for investors:
  • For clients investing in US assets, currency devaluation raises US property and equity investment costs.
  • For Canadian real estate investors, a weak loonie could attract foreign buyers and sustain property demand in key markets.
• Advisory Insight: If clients hold cross-border assets, hedge currency risk. If real estate is part of their wealth plan, advise them on mortgage strategies that capitalize on lower rates from nesto before inflation erodes borrowing power.

Strategic Adjustments Advisors Could Make for Investment Clients

✅ Leverage Low Rates for Liquidity & Asset Growth

• With rates falling, high-net-worth clients should consider accessing home equity via HELOCs for portfolio expansion, business investments, or strategic wealth transfers.

✅ Balance Fixed Income With Mortgage Debt Management

• Fixed-income investments may yield lower returns, but mortgage borrowing costs are dropping faster. Clients with significant GICs or bonds should explore mortgage optimization to improve cash flow efficiency.

✅ Optimize Investment Property Financing

• Rising inflation means higher rents for clients in rental real estate, which can increase cash flow potential. Given anticipated BoC cuts, shifting to variable-rate (VRM vs ARM) or interest-only mortgages could maximize margins.

✅ Prepare for Real Estate Market Disruptions

• Construction slowdowns due to tariffs could exacerbate housing supply constraints, making pre-construction investments riskier but raising the value of existing rental properties.

Positioning Investment Clients for Uncertain Markets

Financial advisors must now integrate their clients’ mortgage strategies into their investment planning conversations. With trade wars and rate cuts reshaping the market, clients need customized mortgage solutions that align with their wealth accumulation, debt efficiency, and investment risk profile.

Now is the time to assess financing structures, optimize tax strategies, and adjust mortgage positioning to ensure clients maximize investment returns while protecting capital against economic volatility.

For tailored mortgage solutions that fit your client’s holistic financial plans, connect them with nesto mortgage experts today.

Why Choose nesto

At nesto, our commission-free mortgage experts, certified in multiple provinces, provide exceptional advice and service that exceeds industry standards. Our mortgage experts are non-commissioned, salaried employees who provide impartial guidance on mortgage options tailored to your needs and are evaluated based on client satisfaction and advice quality. nesto aims to transform the mortgage industry by providing honest advice and competitive rates using a 100% fully digital, transparent, seamless process.

nesto is on a mission to offer a positive, empowering and transparent property financing experience – simplified from start to finish.

Contact our licensed and knowledgeable mortgage experts to find your best mortgage rate in Canada.