Mortgage Term Selection in the Time of Tariff Uncertainty

Financial advisors must guide clients through uncertain mortgage rate environments in today’s volatile economic climate, marked by unpredictable US tariff threats and trade-war rhetoric. Recent commentary on Trump’s trade policies and their ripple effects on Canada’s economy highlights the erosion of economic predictability, which demands a proactive approach to mortgage term selection. 

Too often, borrowers choose the term their banker suggests or the one with the lowest rate (likely with the most juicy premium for the bank) without thoroughly reviewing their financial circumstances. As the gatekeeper of their finances, you are in the best position to understand their overall risk. With bond yields and mortgage rates responding to tariff uncertainty, advisors should help clients balance risk and flexibility in choosing their mortgage terms.

Key Strategies for Effective Mortgage Term Selection

Assess Rate Environment and Forecasts

Current market signals suggest that while fixed mortgage rates remain relatively stable, variable rates have become increasingly attractive amid expectations of further Bank of Canada rate cuts. Advisors should stress that tariff-induced economic uncertainty may prompt additional rate reductions—potentially lowering variable rates to as little as 3.7% in a tariff scenario. Use forward rate data (future bond markets) and stress-testing tools (an Excel sheet which you can plug in details to assess their debt-to-income (DTI) ratios such as GDS/TDS) to help clients understand how varying economic conditions may impact their payments over a five-year term.

Tailor Term Selection to Client Risk Profiles

For risk-tolerant clients who can absorb potential rate rises during the next cycle, a 5-year variable rate might offer significant savings compared to locking in a fixed rate. Conversely, for risk-averse clients or those anticipating near-term life changes, a shorter fixed-term mortgage (e.g., 3 or 4 years) can provide stability and the flexibility to re-assess the market once tariff uncertainties are resolved (most likely after the US midterm elections in 2 years). Emphasize that the average five-year term is often cut short by early renewing and refinancing, so a shorter term can sometimes hedge against penalty risk.

Utilize Preapprovals and Rate Holds

Given the current market’s volatility, advisors must encourage clients to secure preapprovals and lock in favourable rates for up to 120 days (nesto offers up to a 150-day rate lock). This proactive approach mitigates the risk of sudden rate increases caused by shifts in economic policy or further tariff announcements. Emphasize the importance of a well-structured mortgage strategy as an anchor in a broader, holistic financial plan.

Empower Your Client with Integrated Mortgage and Borrowering Strategies

Advisors should integrate these strategies into their client discussions by highlighting how careful mortgage term selection can safeguard against the uncertainties of tariff-driven market shifts. By understanding rate cycles, tailoring term selection to each client’s risk tolerance, and leveraging preapprovals, financial advisors can empower clients to make knowledgeable decisions that support long-term financial stability.

Encourage your clients to re-assess their mortgage options before the next round of economic developments unfolds. For personalized sales advice and deeper insights into mortgage term selection in this uncertain environment, check out our online resources and contact 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.