As headlines continue to focus on the ongoing conflict between Russia and Ukraine, many Canadians may feel that the news is happening worlds away. But global unrest doesn’t just impact politics—it can shape the mortgage market right here at home. When peace negotiations stall, like the recent faltered attempts between the U.S., Ukraine, and Russia, economic uncertainty intensifies. And uncertainty tends to push interest rates higher—or at least keep them from falling. For Canadian homeowners and buyers, this geopolitical gridlock could keep mortgage costs elevated into 2024.
Whether you’re renewing your mortgage or entering the market for the first time, it’s crucial to understand how international instability affects borrowing. Let’s unpack how ongoing global conflicts are creating ripple effects in Canada’s housing economy—and what that means for your wallet.
Rate Relief Now Feels Unlikely in Early 2024
After a series of aggressive rate hikes through 2022 and 2023, Canadian homeowners were hoping the Bank of Canada (BoC) would start cutting rates early in the new year. But despite a cooling inflation rate—sitting at 3.1% as of November 2023 according to Bank of Canada data—the central bank opted to hold rates steady in December.
One unspoken reason? Global instability. Prolonged economic volatility overseas, especially tied to high-stakes conflicts, can drive up oil prices, disrupt supply chains, and weigh down the overall economic outlook. For the BoC, that means staying cautious. Rate cuts seem more likely in mid- to late 2024 now, assuming clearer signs of global de-escalation emerge.
That caution trickles down to mortgage shoppers. Anyone checking the best mortgage rates recently has seen fixed rates still hovering above 5%—a level not seen in over a decade. Even variable rates, which are usually cheaper, are sitting between 6% and 6.5% depending on your lender and credit profile. While that may soften later this year, don’t expect sharp drops just yet.
Canadian Homeowners Feel the Pressure of Prolonged High Rates
With wages lagging inflation and mortgage payments gobbling up a growing slice of monthly budgets, more Canadians are feeling financial stress. According to the CMHC, the mortgage debt service ratio for new mortgages hit 30.8% in Q3 2023—a sign that buyers are stretching their finances more than ever before.
Many of those who bought at low 2020–2021 rates are now facing mortgage renewals at double, sometimes triple, their original rates. For example, a household currently paying $2,000 monthly on a fixed-rate mortgage could be looking at $2,600 or more once renewed. This is causing many to explore mortgage refinance options or consider extending amortization to ease payment pressure.
For others, it’s about adding flexibility. Products like HELOCs are seeing renewed interest, especially from homeowners looking to consolidate debt or fund renovations without tapping into high-interest credit.
Global Conflicts Don’t Just Affect Rates—They Weigh on Confidence
There’s also a psychological layer at play. Large-scale conflicts generate uncertainty, which can cool consumer and business confidence. That’s especially true in real estate. People put purchasing decisions on hold if they anticipate a recession or job insecurity—both common fears during times of global instability.
Real estate activity tends to stall when confidence sinks. The Canadian Real Estate Association (CREA) reported a 19.4% year-over-year drop in home sales as of November 2023, and new listings are also down. Despite tight housing supply, prices aren’t surging the way they did in 2021. Instead, markets are plateauing—or, in some places like Ontario’s suburbs, dipping slightly.
This hesitation in the housing market isn’t just due to affordability. People are unsure where things are headed—globally and domestically. A peace deal in Europe could help stabilize global trade, ease inflationary pressures, and eventually ripple through to lower interest rates. But until then, lenders are pricing risk into their products, and that keeps mortgage rates sticky.
How Homeowners Should Navigate the Road Ahead
While you can’t control international diplomacy, you can control how informed and prepared you are. The interest rate environment in 2024 will remain reactive to more than just domestic inflation numbers. Global developments, like the Ukraine conflict, will continue to shape Canada’s economic picture.
If you’re up for renewal soon, don’t assume rates will be dramatically lower in a few months. It may be wise to lock in a shorter-term fixed rate now, and revisit your options once rates begin to turn. Homeowners looking to tap into their equity should explore if a reverse mortgage or line of credit is suitable for their needs and cash flow.
Use tools like our mortgage calculator to plan ahead, and speak with an expert who can tailor advice to your unique situation. In a time of uncertainty, proactive planning can make all the difference.
Conclusion
As the world watches Ukraine and Russia edge further from resolution, Canadians may not feel the battle directly—but they’re absorbing its economic shockwaves. Prolonged global tensions are adding pressure to interest rates, housing confidence, and mortgage affordability. The result? A tough environment for both current homeowners and prospective buyers.
If you’re navigating renewal, refinancing, or buying plans this year, get expert input. At Unrate, we compare across dozens of lenders and rate types to help you make informed and confident choices. In a market where headlines shift by the day, having a steady guide makes all the difference.
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