Fixed or Variable? Your 2025 Mortgage Guide in a Tariff-Rattled Market

In a stretch where we hear something new about the Canada-US tariff fight almost every day, the real question is which kind of mortgage to take in today's market. My advice for these early days of 2025 is to go with a variable-rate mortgage, also called a variable, and to hold off on a fixed. I'm Moe Asgarian, a senior real estate broker in Toronto and ranked #47 at RE/MAX worldwide. Let me explain how tariffs are pushing on mortgages and why I land where I do.

As I write this, it is still not clear what Trump will decide on Canadian tariffs. First he announced tariffs on all goods, then paused them for 30 days, then put a 25% tariff on aluminum and steel. The back-and-forth has made a lot of people nervous, but it also gives us a live look at how financial markets react.

How Tariff News Moves Rates

When Trump said he would start the tariffs, government bond yields fell and fixed rates came down. The next day, when he paused the decision, fixed rates went back up. Pay attention to that word, fixed. Variable rates are set directly off the central bank's policy rate, and over this period that has kept coming down. Fixed rates move differently, and they also take a cue from the US economy. When US inflation came in a little hotter than expected, fixed rates ticked up. So the two behave very differently in a moment like this.

Why Variable Wins in an Unstable Market

So what do we do if we need to borrow? My answer is a variable-rate mortgage. In unstable conditions, it is the better decision. If the tariff situation gets serious, and I truly hope it does not, Canada enters a real recession. By that I mean the policy rate could come all the way down to 1%. Consider that in Quebec around 40,000 workers are employed in the aluminum industry, along with all the businesses built around those plants. Over in Hamilton, between 22,000 and 33,000 jobs depend on the steel industry. If just those two groups were laid off, it would be enough to drag on the entire Canadian economy.

The Rate Cut Is Not a Wild Guess

A policy rate near 1% is not far-fetched. On the very day the tariffs were supposed to start, the central bank governor arranged a meeting with the finance minister and the CEOs of the big banks. The purpose was to consider a sudden rate cut. What happened instead was that Trump paused the tariff order for a month, and the meeting did not take place. The point is that this expected cut is not baseless speculation. The government and the central bank are ready to lower rates immediately if the situation calls for it.

What Falling Rates Do to Inflation

When rates come down, inflation goes up, but inflation always moves slower. You might cut the rate sharply over a short window, yet the inflation effect does not show up overnight. It can take a year or more. That is exactly why the central bank prefers to lean on its key lever, cutting the rate, as much as it can. Inflation follows, but at a slower pace, and the government usually has a plan to hold it back somewhat.

My Bottom Line

First, we all hope the US does not impose tariffs at all. But if it does, I expect rates to fall quickly, and that points to a variable-rate mortgage. This is a general guide. A mortgage has many moving parts you have to weigh, but broadly, for about 90% of people, if two loans were otherwise identical, variable is the better call right now. Our main work is buying and selling real estate, not mortgages, but if you want to talk it through, I and my team can connect you with people we have worked with for years at various banks so they can help you make the best decision for your life and your goals. Fill out the form below or book a free consultation. Stay well and take care.