News from across the globe can sometimes feel distant—but now and then, distant unrest has real implications for Canadian homeowners. A recent decision by Indonesia’s president to cancel a state visit to China following deadly protests draws attention to the delicate balance of global political and economic stability. While this may not sound like it has anything to do with your mortgage payments or Toronto’s housing prices, it actually touches the core of how international tensions trickle into domestic interest rate decisions and real estate markets.
Global Instability and Central Bank Strategy
When international incidents disrupt trade routes or key supply chains—as unrest in Asia often can—central banks worldwide take notice. For Canadians, this matters because economic instability can affect energy prices, global supply bottlenecks, and currency exchange rates. Each of these influences inflation, one of the biggest drivers behind Bank of Canada rate decisions.
Canada’s central bank has kept a close eye on inflation since 2022, making a string of rate hikes to curb skyrocketing prices. While inflation is gradually falling (down to 2.9% in May 2024, according to Bank of Canada data), ongoing global disruptions could slow that progress. If inflation remains sticky due to global volatility, the Bank of Canada may delay its expected rate cuts—keeping mortgage rates elevated for longer.
This is critical for anyone shopping for a new mortgage or considering a refinance. An extended period of higher borrowing costs could alter your affordability outlook.
Investor Confidence and the Real Estate Market
Events like the Indonesian protests have a knock-on effect on investor confidence worldwide. When emerging markets show signs of instability, risk-averse investors shift to safer assets, including Canadian real estate. This can heat up demand, particularly in markets like Vancouver, Calgary, and the GTA, where foreign buyer interest has traditionally been high.
Despite ongoing efforts to cool the Canadian housing market, including tighter mortgage stress testing and foreign buyer restrictions, international capital flows are hard to predict. If investors perceive Canada as a more stable place to park their money, we could see renewed upward pressure on home prices—just as affordability is beginning to improve.
According to the Canadian Real Estate Association (CREA), national home sales rose 5.6% in May 2024 compared to the previous month. Much of that boost came ahead of expected policy changes, but persistent global unrest could indirectly sustain buyer activity as well.
For homeowners thinking of tapping into their equity, this could be a moment to explore a refinance option or even draw on a HELOC while valuations remain strong.
Mortgage Rates: Fixed or Variable in Uncertain Times?
For Canadians trying to decide between fixed and variable rate mortgages, the increasing unpredictability of global events presents a conundrum. Historically, variable rates offer savings when interest rates trend downward. However, when global instability muddies interest rate forecasts, fixed rates might offer the peace of mind homeowners crave.
In today’s market, fixed mortgage rates have remained relatively steady, hovering around 4.9% for a five-year term, while variable rates are slightly higher due to the prime rate staying elevated. If you’re tracking economic signals and betting that rate cuts are delayed, a fixed-rate product could help you sidestep near-term volatility. Conversely, if you believe rates will drop late in 2024 as projected, a variable rate might be worth the wait. Use our mortgage calculator to explore monthly payments under different scenarios.
Choosing the right term is more art than science during times like these. It hinges not just on interest rate outlooks but also on your financial plans and tolerance for risk.
What This Means for Canadian Homeowners
You don’t need to track Indonesian geopolitics on a daily basis, but it’s helpful to recognize that ripple effects from distant events show up in our borrowing costs, home prices, and investment decisions. The more interconnected the world becomes, the more vigilant we must be as mortgage holders or soon-to-be buyers.
Even before Indonesia made headlines, Canada’s housing landscape has been increasingly shaped by external events—from Ukraine’s conflict to OPEC’s oil price moves. These factors all shape inflation, central bank policy, and ultimately your mortgage rate.
For older homeowners considering unlocking home equity without selling, now might be a prudent time to look into a reverse mortgage. These products offer a buffer against uncertain housing values and allow you to stay put while accessing needed funds.
Final Thoughts: Stay Informed, Stay Agile
Indonesia’s evolving political situation is a reminder that foreign headlines may carry weight for us at home. Shifting investor sentiment, delayed interest rate cuts, and fluctuating home prices can all stem from unrest far away. While you can’t control global uncertainty, you can control how prepared you are for its financial effects.
If you’re unsure how to navigate today’s conditions—or whether your mortgage still fits your needs—Unrate is here to help. Our advisors can walk you through your options and help you take advantage of today’s market with confidence.
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