Global stock markets went into a downward spiral after U.S President Donald Trump announced sweeping trade tariffs on many countries around the world. As worrisome as those tariffs are, there is a silver lining in them for Canadians looking to buy a house. Experts say that the U.S. trade tariffs may lead to lower interest rates for fixed rate mortgages, at least in the short term. 

The pricing for this type of mortgage reacts to what happens to bond yields. In Canada, bond yields, particularly the 5-year government bond yield, are a strong indicator of fixed mortgage rates, as lenders use them as a benchmark, and when yields rise, so do fixed mortgage rates, and vice versa. And shortly after the Trump tariffs announcement bond yields plunged to lows not seen in three years.

A downward pressure on bond yields, puts a downward pressure on fixed mortgage rates. The five-year Government of Canada yield on which mortgage providers largely base their fixed mortgage rates, dropped from a high of 2.66 on March 28th before the Trump announcement to a low of 2.55 on April 3rd after the tariffs announcement.

While tariffs won't directly change mortgage interest rates, they may set off a chain reaction that could lead to lower rates. Shortly after the announcement, stocks plunged and investors turned to bonds. And when demand for bonds is high, bond issuers offer lower yields.

So what can happen to mortgage rates in the coming weeks and months? "If President Trump keeps these tariffs in place rather than using them as a short-term bargaining tool, bond yields could see continued downward pressure, bringing mortgage rates down with them," says Dan Richards, President of Flyhomes Mortgage.

Still, bond yields have also bounced back when President Trump backed down from his tariffs. That means if you’re shopping for a home or renewing your mortgage, it’s critical to get a rate lock now in case rates rise and you can always get a lower rate before you finalize your mortgage if rates go even lower.