ZT-BMO study says variable-rate mortgages better deal for borrowers most times

郭森房贷

Fri Oct 23, 5:12 PM
By The Canadian Press

+ ^9 D% m* |% ^6 l* D7 t0 f& oTORONTO - Fixed mortgage rates may help you feel secure in your budgeting, but the Bank of Montreal (TSX: BMO.TO) says the more volatile variable rate mortgages will save you money in the long run.
  _2 c4 g$ k, I" e
& H/ R. t7 J, e, D# g. z9 L4 b" rThe bank put out a report Friday showing that, over the past 30 years, variable-rate mortgages have been more cost-effective about 82 per cent of the time. That may come as a surprise to some after studies have shown many Canadians prefer a fixed-rate mortgage.

A fixed rate locks the borrower into a set interest rate for a certain period of time.
. \8 c2 [) F  q2 |
& M4 f- ?( s: u$ _2 M1 jThat gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.

: {0 L+ D( \! T; R6 ]3 NVariable rates change along with interest-rate moves.

5 t+ _# w2 e8 M0 ^* h- z- E: pBMO said the Bank of Canada's overnight lending rate is at its lowest possible point now, which could mean there are fewer benefits to a variable rate in the foreseeable future.

BMO highlighted two historical periods when fixed rates were considered beneficial - in the late 1970s and late 1980s - and both were just before interest rates started rising again.

3 l, P0 P* D$ {( _The bank added that the current interest environment is similar to both of these periods.

"Short-term rates are at extreme lows and pressure is likely to build for higher rates in the year ahead," said deputy chief economist Doug Porter in the report.
) p% y% a- G' D4 z! B% F+ L
"The question of whether to lock in to a longer-term fixed mortgage rate or stay in a variable rate has become an increasingly complex and important issue."

Canada has been in a long-term declining rate environment since the early 1980s, the bank suggested.
# P/ ?7 \% r% W5 O/ M& V+ v
; }9 ~9 S& _& S  I5 Y9 p6 zAs a result, the spread between five-year fixed mortgages and variable mortgages has been pushed wider in recent years, and is now near an all-time high.

edmonton-fish

HIDEdmonton