{"id":16093,"date":"2018-12-28T01:00:08","date_gmt":"2018-12-28T06:00:08","guid":{"rendered":"https:\/\/www.zoocasa.com\/blog\/?p=16093"},"modified":"2018-12-21T15:16:07","modified_gmt":"2018-12-21T20:16:07","slug":"how-the-usmca-will-affect-mortgage-rates","status":"publish","type":"post","link":"https:\/\/www.zoocasa.com\/blog\/how-the-usmca-will-affect-mortgage-rates\/","title":{"rendered":"How the USMCA Will Affect Mortgage Rates"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">In October 2018 Canada and its closest trading partners &#8211; the United States and Mexico \u2013 agreed to a new trade deal, which will replace NAFTA, called the United States-Mexico-Canada Agreement (USMCA).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">While the new deal is expected to have far-ranging implications for many industries, including the auto and dairy industries, it has also impacted&nbsp;<a href=\"https:\/\/www.ratehub.ca\/mortgages\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"Canadian mortgage rates (opens in a new tab)\">Canadian mortgage rates<\/a>. Let us explain.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But, first, a backgrounder on the USMCA<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">During the 2016 US presidential election, future President Donald Trump promised to re-negotiate or even axe the North American Free Trade Agreement (NAFTA), which had been in place since January 1, 1994.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Negotiations for the new agreement ended when it was signed on November 30, 2018. It\u2019s similar to NAFTA (with some colloquially referring to it as NAFTA 2.0) but gives the United States greater access to Canada\u2019s dairy market and encourages more domestic production of motor vehicles. It also increases labour and environmental regulations and includes updated intellectual property protections.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">So, what does this have to do with mortgages?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">One of the big questions for aspiring first-time homebuyer is&nbsp;<a href=\"https:\/\/www.ratehub.ca\/mortgage-affordability-calculator\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"how much mortgage can I afford (opens in a new tab)\">how much mortgage can I afford<\/a>?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">There are many factors that will determine this; home prices, income, down payment amount, and interest rates.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And the trade deal is expected to have an impact on one of those factors: Mortgage rates.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Rates on the rise<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">You may have heard that Canadian mortgage rates are on the rise.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Bank of Canada has increased its benchmark for the overnight rate three times this year; increasing it from 1% to 1.25% in January, to 1.5% in July, and to 1.75% in October.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Meanwhile, the&nbsp;<a href=\"https:\/\/www.ratehub.ca\/best-mortgage-rates\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"best five-year fixed mortgage rate (opens in a new tab)\">best five-year fixed mortgage rate<\/a> was 2.79% in January 2018. It jumped to 3.13% by August; 3.19% by October; and currently sits at 3.29%.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Prior to the latest Bank of Canada rate increase, trade uncertainty was one of the major factors cited by the Bank for maintaining its policy rate. Meaning the Bank held off on increasing its benchmark rate \u2013 which impacts mortgage rate fluctuations \u2013 until a deal was agreed to.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This was the Bank\u2019s comment in July: \u201cAs in April, the projection incorporates an estimate of the impact of trade uncertainty on Canadian investment and exports. This effect is now judged to be larger, given mounting trade tensions.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And, in September: \u201cRecent data reinforce Governing Council\u2019s assessment that higher interest rates will be warranted to achieve the inflation target. We will continue to take a gradual approach, guided by incoming data. In particular, the Bank continues to gauge the economy\u2019s reaction to higher interest rates. The Bank is also monitoring closely the course of NAFTA negotiations and other trade policy developments, and their impact on the inflation outlook.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Finally, this is what it had to say in October, following the announcement of the USMCA: \u201cThe new US-Mexico-Canada Agreement (USMCA) will reduce trade policy uncertainty in North America, which has been an important curb on business confidence and investment.\u201d<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The Bottom line<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The Bank of Canada waited until Canada agreed to a new deal with its closest trading partners before continuing with its intended policy of raising rates.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Now that a deal has been struck, however, mortgage rates will further increase if and when the BoC decides to continue hiking its own target rate.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In October 2018 Canada and its closest trading partners &#8211; the United States and Mexico \u2013 agreed to a new trade deal, which will replace NAFTA, called the United States-Mexico-Canada Agreement (USMCA). While the new deal is expected to have far-ranging implications for many industries, including the auto and dairy industries, it has also impacted&nbsp;Canadian [&hellip;]<\/p>\n","protected":false},"author":42,"featured_media":15538,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jnews-multi-image_gallery":[],"jnews_single_post":[],"jnews_primary_category":[],"footnotes":""},"categories":[487,33],"tags":[],"class_list":["post-16093","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-guest-posts","category-real-estate-news"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How the USMCA Will Affect Mortgage Rates | Zoocasa<\/title>\n<meta name=\"description\" content=\"Wondering how the USMCA will affect mortgage rates? 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