April 2025 LifeSpring Insights

Another year, another crisis? But here’s some good news: Economic disruptions like the global trade war can also bring opportunities to investors, including those in real estate.

The family home, is a critical store of wealth for many people, accounting for about 43% of a typical household’s assets, according to January figures from Statistics Canada.

Below we’ll examine some strategies to grow and protect that wealth – especially for those looking to save for a home (or help a child do so), those looking to buy one, or anyone looking to take on a major renovation.

Let’s start with one of the first questions anyone shopping for a mortgage will face.

Fixed- or variable-rate mortgage? This one strength could give variables the edge

Both of the two main types of mortgages have advantages and disadvantages: Fixed rates give you a stable payment, but they have been shown to be more expensive over the long run. Variable rates are generally cheaper over the life of the mortgage, but they expose you to the risk of rising interest rates.

However, “variables” have an often-overlooked feature: the ability to convert to a fixed-rate mortgage at any time during the variable’s term. That brings us back to the trade war: If it slows the economy, as many economists expect, the Bank of Canada will likely cut rates further.

That gives current mortgage shoppers a potential strategy: Take a variable rate now, wait for the rate cuts, then convert to a fixed for the rest of your term and enjoy lower rates.

A couple of caveats: A variable-rate mortgage is only for those who can accept the risk of an unexpected rise in interest rates. And it’s important to be clear on your lender’s terms and conditions for converting before taking out a variable-rate mortgage.

However, with rates likely to fall now that the trade war has heated up, now could be a good time to put this strategy to work. Your BlueShore Financial team can help you discover whether it’s right for you.

Renewing your mortgage? Two approaches, based on your last renewal date

We’ve heard a lot about the “renewal cliff” in the last couple of years: It’s where those who renewed or took out a new mortgage during the low-rate pandemic years are now, five years later, facing renewals at significantly higher rates.

If you’re in this situation, it may make sense to make a lump-sum payment around the time of renewal, if possible, to protect your monthly payment as much as you can. If that’s not an option, speak to your lender about extending your amortization from, say, 20 years, if you’re at the end of your first five-year term, back out to 25 years.

Of course, this could delay the date at which you’ll be mortgage-free. However, it would help blunt the payment increase at renewal. And during your next mortgage term, you’ll have time to try to pay your mortgage down faster and catch back up.

But those facing the mortgage cliff aren’t the only part of the mortgage-renewal story in 2025 and 2026. Think back two or three years, when mortgage rates rose as high as 7%. That was tough to swallow for anyone renewing a mortgage then. But with rates expected to fall in 2023 and 2024, many borrowers renewed at shorter terms – one or three years, for example, in hopes of being able to renew at the end of those periods at lower rates.

Fast-forward to now and that strategy has paid off. As a result, these borrowers will see their payments drop, given that fixed-rate mortgages are now available for a little over 4%.*

That’s great news for them, of course. Something else to bear in mind: If you’re in this camp, you can renew up to four months before the end of your current term and start enjoying lower payments sooner. This also protects you from any surprise interest-rate increases.

From there, you could reinvest your savings elsewhere or, if the payments were manageable at your former rate, keep them the same and pay down your mortgage faster. Your advisor can help you determine the best course of action here.

First-time homebuyer? This exemption could save you thousands 

If you’re a first-time buyer, keep in mind that you might be exempted from all or part of the property-transfer tax payable on your new home. If you qualify, you could save a lot: On a property valued at $500,000 (more on that amount in a moment), there would be a total of $8,000 in property-transfer tax payable.

This is where BC’s first-time home buyers’ program comes in. To qualify, you must have been a resident of the province for at least a year before the date on which you register your new property; you must also have filed at least two tax returns as a resident in the six preceding tax years (see the program’s website for the full list of qualifications).

Under the program, qualifying properties get a full exemption from property-transfer tax on the first $500,000 of the purchase price – $8,000, in other words – so long as the home has a value of $835,000 or less. If the property’s value is between $835,000 and $860,000, that $8,000 will be reduced in proportion to how close it is to that $860,000 upper limit.

The bottom line: If your home qualifies and has a value between $500,000 and $835,000, you could receive $8,000 in savings on your property-transfer tax. That could be enough to cover your closing costs and even a few mortgage payments. 

Gifting a down payment? Do this to protect it

Home prices have been moving lower in the Greater Vancouver area, but they’re still high, at $1.22 million, according to recent WOWA.ca Vancouver Housing Market reporting. The average condo price saw the biggest drop of all types of housing, down 5.1% from a year ago, but you’ll still pay some $785,000 for one – a significant amount, especially for a first-time buyer.

And when you consider that you need a down payment of at least 5% (and up to 20% depending on the value of  the home) to qualify for a mortgage, it’s no surprise that the “bank of mom and dad” is helping more first-timers get into the market these days.

If you’re planning to help a child out, don’t forget to take steps to protect your family’s investment. For example, what happens if the couple files for divorce if you provided all or the bulk of a down payment? This should be discussed before you hand over the funds – and a lawyer should be involved so any agreement is drawn up correctly.

Note also that lenders will require you to provide proof that the money is indeed a gift, with no expectation of repayment. That way it’s clear that your gift won’t affect their capacity to make their mortgage payments.

Renovating? Give yourself a “buffer” on these costs

US tariffs, and Canadian retaliation, have added more uncertainty for those looking to renovate (a process fraught with uncertainty as it is). For those undertaking one now, you’re your best move is to get at least three quotes (and ideally more) from contractors. That’s because, depending on how in-demand they are, contractors can quote wildly different prices, so you’ll want to cast a wide net.

In terms of materials, you’ll also want to consider acting as soon as possible to make a purchase, so as to lock in today’s prices. Speak to your contractor here, as well, to see if they can acquire what you’ll need at a bulk discount by, say, pairing your materials with those from other projects.

Moreover, bear in mind that if you’re borrowing to complete the project, say with a home equity line of credit (or HELOC), that these rates tend to be tied to the Bank of Canada’s policy rate and can move higher.

So, when budgeting your reno, add1% to your current interest rate to give yourself a buffer.

Your advisor can help you steer through this uncertain market

Trying to buy a home now, or renew a mortgage, isn’t easy, with the economic winds seeming to shift almost hourly. The key is to be proactive and deliberate – whether it’s locking in a lower mortgage rate, getting the most savings you can as a first-time buyer, protecting your down payment or getting the clear costs of a reno. Your financial advisor has experience in all of these areas and stands ready to help. Make an appointment today.