Steve Vallières, Mortgage Development Manager at National Bank, reveals what you need to know before you lock your rate.
I recently sat down with Steve Vallières, our trusted mortgage specialist at National Bank, to get a read on what will come of the current geopolitical situation.
Our conversation covered how broader economic conditions are influencing lenders and borrowers across Canada.
Steve brings considerable experience to the table. He handles significant mortgage volume, which gives him a strong perspective, not just on individual borrower behaviour, but on the larger financial picture shaping Canadian real estate.
What Lenders Are Watching
According to Steve, lenders have been closely monitoring inflationary pressures for quite some time. Much of the concern stems from the rising cost of funds for banks, driven by global instability, geopolitical tensions, and ongoing economic uncertainty abroad.
He offered an important clarification: while Canadians often focus on the Bank of Canada’s overnight lending rate, fixed mortgage pricing is actually shaped more by the bond market and the cost for banks to secure capital.
A Shift in Borrower Behavior
One trend Steve has seen accelerate recently: Borrowers locking into longer-term fixed mortgages.
More clients are opting for 3‑, 5‑, and even 10‑year terms, largely because they believe rates may continue rising.
Despite concerns around affordability and inflation, buyers are still moving forward with their real estate plans.
That said, he does believe a portion of consumers are becoming more cautious and more calculated with their purchasing decisions.
The Competitive Landscape
Steve pointed out that Canadian banks, including National Bank, remain highly competitive, especially during peak real estate periods like the spring market. In his opinion, lenders are sometimes willing to absorb part of the increased borrowing costs in the short term to stay competitive and capture market share.
He emphasized, however, that this balancing act cannot continue indefinitely.
“There’s always a fine line between stimulating the economy and controlling inflation,” he explained. “Eventually, if inflation remains persistent, rates have to adjust.”
Fear vs. Reality
The fear surrounding interest rates can sometimes be greater than the actual impact borrowers would experience, Steve believes.
One important safeguard in Canada’s mortgage system is the federal mortgage stress test. Borrowers must qualify at a rate significantly higher than the one they actually receive, typically the contract rate plus 2%, or the minimum qualifying benchmark. Because of this, many homeowners already have a built-in financial buffer against moderate rate increases.
As far as he sees, even if rates were to rise further, the increases necessary to stabilize inflation would likely be far less dramatic than many consumers fear. Most borrowers, he believes, would be able to absorb the impact without significant disruption to their day-to-day lives.
An optimistic note
We ended our conversation on a notably optimistic note:
While Canada is certainly not immune to global economic pressures, Steve believes Canadians are fortunate that many of the geopolitical conflicts and financial shocks affecting markets are occurring outside our borders. Yes, we continue to feel secondary effects through inflation, supply chain pressures, and higher costs, but he remains confident in the resilience of the Canadian economy.
His message was simple: If Canadians continue focusing on economic stability, responsible borrowing, and long-term growth, the country will navigate these challenges, just as it has, through every previous period of uncertainty.à