The Canadian federal budget has real consequences for mortgage rates, taxes and the long term cost of borrowing for homebuyers. When Ottawa announces a large deficit, it affects how much the government needs to borrow and how global investors view Canadian debt, and that eventually shows up in the interest rates homeowners pay.

Keep reading or watch my video for more details:

Federal Budget Deficits and Government Borrowing

This year’s federal budget includes a projected 78 billion dollar deficit. In simple terms, the federal budget shows the government plans to spend 78 billion dollars more than it will collect in taxes. That gap has to be funded by issuing more government bonds.

The more the budget relies on borrowing, the more government of Canada bonds have to be sold to investors. To attract enough buyers, the government may eventually need to offer higher yields. Those higher yields are one of the key inputs used to price fixed mortgage rates in Canada. When the budget adds a lot of new debt into the system, it increases the risk that rates drift higher in the future, even if we see short term dips.

How the Federal Budget Affects Mortgage Rates

We have seen fixed mortgage rates come down from their peaks as inflation has cooled and the Bank of Canada has started to ease. The challenge is that a federal budget built on large deficits can push in the opposite direction over time.

If bond traders look at the federal budget and worry that Canada is spending too much or taking on too much debt, they may demand a higher return to lend money to the government. That shows up as higher bond yields. Since fixed mortgage rates are closely linked to those bond yields, a federal budget with big deficits can put a floor under how low mortgage rates can go or even push them higher later.

At the same time, interest payments on the existing debt are already costing more than a billion dollars per week. As the budget adds more borrowing, that interest bill grows. Over time that can mean higher taxes, less flexibility for future governments and another source of pressure on the overall cost of living.

Federal Budget Promises on Housing

Each year the budget includes a list of housing and “affordable housing” commitments. This budget is no different. Ottawa is promising to spend more money to support affordable housing projects and programs.

From my perspective as a mortgage broker, the federal budget tends to overestimate how effective government spending is at fixing housing supply. Building and managing housing directly is expensive and slow. It often adds administrative costs without addressing the core issues of zoning, permitting and private sector construction capacity.

For homebuyers, it is important to remember that announcements in the budget do not automatically translate into lower prices or easier approvals. The bigger driver is still supply and demand in your local market and the interest rates that come out of bond markets reacting to the budget and other economic news.

What This Federal Budget Means for Homebuyers

If you are a first time homebuyer or you have a renewal coming up, the budget is another reminder not to assume mortgage rates will keep dropping forever. Inflation has cooled and the Bank of Canada has started to cut. At the same time, a federal budget built around a 78 billion dollar deficit creates long term uncertainty about where rates will settle.

In practical terms, the federal budget should nudge you to be proactive.

• If your mortgage is up for renewal in the next year, start reviewing your options early.
• If you are thinking about buying, get a pre approval and a rate hold so you know where you stand if markets react to the federal budget.
• If you are stretched, look at your budget now, rather than hoping that lower rates will solve everything later.

How I Can Help You Navigate the Federal Budget and Rates

My role as a mortgage broker is to translate news like this federal budget into practical advice for your specific situation.

Whether you are preparing to buy your first home or your fifth, if you’re looking to get pre-approved for a mortgage in Edmonton, fill out my online application. I’m here to help you every step of the way.

About Jason Scott, Edmonton Mortgage Broker

Looking for a personalized mortgage solution? As an Edmonton Mortgage Associate, I’m trusted partner who will help you get the right mortgage for your home or investment property. I’m Jason Scott, and I’ll be your Mortgage Broker in Edmonton.