This week, a subtle but significant shift in global energy trade has made waves beyond just international markets. Asia is pulling back from liquefied natural gas (LNG) imports due to high prices, while Europe is stepping in as the new demand driver. This change may feel far removed from your home or mortgage paperwork—but it could ripple into Canadian real estate and borrowing costs in very real ways.
At Unrate.ca, we keep a close eye on economic trends that may influence interest rates, housing affordability, and buyer sentiment. When a commodity like LNG—critical to heating, manufacturing, and electricity production—becomes volatile, it affects inflation targets and central bank decisions. Here’s why this global shift matters locally, especially if you own a home or plan to buy one soon.
Europe’s LNG Appetite and Inflation’s Domino Effect
With Asia stepping back from high LNG prices, European nations are securing more of the global supply to meet winter heating needs and reduce reliance on Russian gas. According to data from Kpler, Europe is expected to set another record for LNG imports this year—after already boosting their intake significantly in 2022 and 2023.
What does this have to do with Canada? LNG isn’t directly used in most Canadian households, but global energy prices are major contributors to inflation. Higher transportation, manufacturing, and heating costs overseas can trickle into domestic prices, especially for imported goods. When inflation rises, the Bank of Canada has one major tool to control it: interest rates.
Even as energy prices receded throughout 2023, any resurgence due to geopolitical instability or shifting global demand could influence the Bank’s ability to lower rates. And that means mortgage costs could stay elevated longer than expected.
Interest Rate Pressures Don’t End at Our Borders
In December, the Bank of Canada held its overnight target rate at 5.0%, the highest in over two decades. The Bank emphasized it is watching inflation closely, especially how energy prices evolve globally and how they feed into business and consumer costs here at home.
If LNG prices stay high due to increased European demand and tight supply, Canada may feel the burn. Although our natural gas supply is more local, the broader implications of costly energy—like higher grocery bills and shipping fees—make their way into key inflation metrics the Bank watches.
And inflation isn’t just a buzzword. It affects your real-world borrowing ability. Even if inflation slows generally, spikes driven by energy or global instability can push the Bank to delay cutting lending rates. That means fixed rate mortgages and especially variable options may remain costly longer into 2024 than some anticipated.
Homebuyers Are Feeling the Strain
We’re seeing the impact on buying behaviour across Canada. According to the Canadian Real Estate Association (CREA), national home sales in November 2023 dropped 0.9% from October, despite a year-over-year increase. That’s a signal of uncertainty, as buyers stay in wait-and-see mode while they weigh rate expectations and affordability.
Affordability remains stretched in many major cities. For instance, in markets like Toronto and Vancouver, average home prices continue to be well above national levels. The average Canadian home price in November was $646,134—but in Toronto, it’s closer to $1 million. Policies and rate hikes aimed at taming inflation have curbed price growth in some smaller markets, but they haven’t resolved the underlying cost challenges.
Uncertainty around when the Bank of Canada will pivot to rate cuts is keeping some would-be buyers on the sidelines. That also puts pressure on those with mortgages up for renewal or refinancing. Many are now confronting a ‘payment shock’ as they shift from low pandemic-era rates to current levels above 5% or 6%—or higher.
What Can Homeowners Do Right Now?
If you’re in your 40s or 50s and staring down a mortgage maturity in the next 12 to 24 months, now is the time to run the numbers. Use a mortgage calculator to get a sense of updated monthly costs, and consider what payment options are available depending on your lender and financial situation.
It’s also worth exploring whether a reverse mortgage or home equity line of credit (HELOC) could help you navigate a higher-rate environment without having to sell or downsize too early.
On the investment side, demand in urban rental markets remains strong. Homeowners considering a second property might want to look into second mortgage options—but should carefully factor in rate volatility before jumping in.
And importantly, monitor commodity news like this LNG shift. It’s not abstract market chatter—it’s a clue into what financing will look like in both the short and long term. Whether you’re buying your first home or looking at a renewal strategy, understanding global energy trends can offer valuable context around decisions you make here at home.
What This Means for You
The global pivot of LNG demand from Asia to Europe may not directly heat a Canadian home—but it could shape the rates that determine whether your next mortgage is affordable or out of reach. Inflation doesn’t respect borders, and energy remains a top contributor. Staying informed about market shifts can help you make better personal finance decisions.
At Unrate.ca, we’re here to help Canadian homeowners make sense of these connections. If you’re trying to decide whether to lock in your mortgage, renew with better terms, or explore equity solutions, we can guide you through it. Don’t wait for the next rate hike to ask questions—we’re just a call or click away.
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