Brexit and Canadian mortgages – what’s the link, you may ask? How could events on one side of the Atlantic Ocean affect the other?
It turns out that the making or breaking of financial treaties and global trade agreements can have a direct effect on the individual, regardless of location.
Back in 2016, when a majority in the UK voted to leave the European Union, financial experts in Canada predicted that the move would affect the local property market (including mortgages).
Here are some of the ways in which this impact could be experienced by Canadians seeking to buy a house.
Anticipated Brexit Impact on Canadian Mortgage Rates
British nationals are suddenly finding themselves facing the consequences of exiting the EU. There is some expectation for property taxes to go up in the EU when it comes to British owners. Travel hindrances could also result from the dissolution of treaties and agreements.
What do these things have to do with Canadian mortgage rates?
The answer is “very little” in the short term. The Brexit happened officially on February 1, 2020. There was a transition period until the end of the year but nothing much changed over the course of the 11 months.
The rules governing the new relationship between the EU and the UK became effective on January 1, 2021.
Hence, the ripple effect that will potentially impact the rest of the world is yet to take place.
In Canada, there hasn’t been a significant change in mortgage rates over the past year. March 2021 marked a slight increase in mortgages, the first one since the start of the Covid-19 pandemic. The overall increase, however, has been fairly small. Some banks even decided to keep mortgage conditions unchanged for their clients.
Over the long term, Brexit heightens some global financial risks. There’s a probability of financial and stock market volatility. If this happens, downward pressure would be exerted on bond yields. As a result, mortgage rates could also go down.
Don’t forget, however, that the aftermath of Brexit is only one of the factors that could impact international finances. Other developments could negate or enhance the effect of Brexit and all of them should be examined together to paint a comprehensive picture.
Brexit and the Homeowner/Property Hunter: Will Something Change
Over the course of 2020, a record number of property transactions occurred due to favorable conditions.
As the Canadian economy is expected to pick up in 2021, chances are that these conditions will start to change. Brexit will probably have a very minimal effect on the Canadian property market (if any at all). Thus, if you’re considering a property acquisition right now, the time is right to make a move.
Market volatility is a normal phenomenon that occurs after every big economic or political transition. Its effect is global, regardless of the fact that some parts of the world are much more impacted than others.
There’s one important thing, however, that separates Brexit from other major shakeups.
The financial crisis of 2008 occurred suddenly and the world was unprepared. Most of the Brexit details were known in advance. This is why financial experts can make fairly accurate predictions, allowing end buyers to make good and rational decisions.
Your upcoming property purchase is probably unthreatened by Brexit right now. Do keep track of Covid-19 developments alongside international financial and political developments. All of these could eventually put some pressure on the market, taking it in a specific direction over the coming months.
Getting the right information in this day and age is hard. While articles can provide you with general information and advice, the best person to speak to is your professional mortgage broker. They have the experience and industry knowledge to give you up-to-date information on what’s going on locally and globally and offer sound, practice advice on current and future mortgage issues.