More change.

The Fed cuts its policy rate by a quarter point today. There may be one more coming next month. But then, the brakes will grip.

An America-first, tariff-loving administration next year will likely bring slower US economic growth and rekindle inflation, economists say. The reasons are simple. Tariffs are paid by end users, not the countries where goods originate. That increases consumer prices and the per-family cost if Trump imposes a 10% levy is estimated at about $4,000. Too bad most people don’t understand. “China will pay,” he said on the campaign trail. But China knows differently.

Meanwhile lower corporate taxes, reduced regulation and fired-up financial markets will make the rich richer (yesterday’s stock rally earned the wealthiest Americans another $64 billion – including Elon Musk, about to enter the Trump cabinet and who financed his ground game) and strengthen the US dollar, making exports less competitive. Concurrently, the mass deportations the new president says are coming will reduce the pool of cheaper labour, which will increase costs, and add to inflationary pressures.

All of this, we’re hearing, means the expected four interest rate cuts by the Fed in 2025 will likely fizzle to just one. Or maybe none.

And us?

Our dollar is weak now because the greenback is strong and we’ve cut rates four times – creating a big gap between the two countries. (Capital flows to where it gets the best return, which ain’t here.) If Canada gets whacked with Trump tariffs we’ll go from 0% growth to negative numbers next year, warn the banks. That’s called recession. Unemployment goes up. When the jobless ranks swell, real estate usually goes down.

And what happens in a recession?

The Bank of Canada has but one tool – lower interest rates to stimulate more demand and economic activity. But if (a) Trump is in the White House, (b) trade-busting tariffs are in place, (c) our dollar is struggling, making imports more costly and fuelling inflation and (d) there’s already a yawning gap between Canadian and US rates, pushing the currency lower, what can poor Tiff do? More cuts would hit the loonie and feed higher prices – which the CB would normally fight with rate hikes. But the cost of money can’t go up during a recession. Gulp.

See what I mean? Potential chaos. This is exactly why seven months ago a major Canadian bank report (we brought you) forecast a Trump win would eventually foster negative growth, a 1.7% increase in the CPI and interest rates increasing by almost 2%.

Can you imagine what would happen to our major urban housing markets if mortgages suddenly reverted to 6%? Or even 5%? After all, prices have barely moved down over the past two years and remain insanely unaffordable.

And, yes, that tsunami of mortgage renewals is still washing towards us, set to arrive in the months after Donald Trump is sworn in as the single most powerful person on the planet – in a country where he’ll control all the levers of government (White House, Senate, Congress, Courts). No guardrails. And nobody cares about Canada.

By the way, 1.2 million families need to renew their home loans in 2025. A million more the next year. Oxford Economics says that should lead to a deluge of new listings and possibly an increase in mortgage defaults – which Ottawa has been trying to stem by asking lenders for extra leniency.

The key point is this: the renewal flood poses an extra reason why the Bank of Canada has to keep lowering rates, as it struggles with new American protectionism, an imminent recession, plus a flagging loonie and the mounting consumer prices that brings.

So what now?

Last month house sales in every major market shot higher, on the back of the fourth rate cut. In Ottawa sales were ahead 50%. “Consumer confidence is getting stronger, boosted by another consecutive Bank of Canada interest rate cut — though many are waiting for additional rate drops,” said the realtors. In Vancouver sales increased 27% in October from September – the best monthly increase since Covid. In the GTA, there was a 44% jump in deals year/year. But in all of these markets, including Calgary, Victoria, Halifax and Montreal, prices stayed stuck, or increased marginally.

Were all these buyers not paying attention to the US election’s risk? Or the warnings of banks and their pointy-head PhDs? Was it just a matter of mortgage costs falling another half-point? Were they encouraged by politicians telling them to buy, baby, buy because 30-year mortgages and cheaper downpayments were coming? Did they not smell the danger involved in taking on huge loans when prices were at nosebleed levels and the economy threatened?

Dunno. Real estate is visceral. Folks want some, despite their better judgment. Besides, most are not like us. They’re zoned out. And, as with the bitter people who comment on this blog, many cheer anyone shoving a stick in the eye of The Man.

They’ll learn. He’s us.

About the picture: “This regal looking creature is my Mum’s new cat, Luna,” writes teh poster known as Flop. “She recently lost a 13 year old male Ragdoll, this new one is a 3 year old female, my Mum described her as dainty. I’m sure they’ll be best buds. My Mum will give her a good home after the previous owner was forced to give her up due to work commitments. If  I had a cat like that I’d be too tempted to use it as a duster…”

To be in touch or send a picture of your beast, email to ‘[email protected]’.