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

郭森房贷

Fri Oct 23, 5:12 PM
# W) S4 l4 J9 `  T5 r$ lBy The Canadian Press
* g6 ]- S; t7 J2 @& V: U" M3 ^$ S
TORONTO - 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.
1 V9 G$ `" L2 i( A. X- N% i
% @, U! h4 N4 QThe 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.
" _9 F$ m5 J8 `8 l' g/ X( K8 {
; Q' m) `2 g9 q9 n5 eA fixed rate locks the borrower into a set interest rate for a certain period of time.
7 h% {- t: K, `: ~
; _7 K' J/ }, B& CThat gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.

8 Q1 `5 s" e3 aVariable rates change along with interest-rate moves.
6 m6 S- k  z# i5 ]( E) Z  `7 m
4 n4 N' a" A) ]9 G$ ?/ u9 x: L$ ~BMO 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.

1 Q" ?3 N! ^: \3 I, ~$ @9 aBMO 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.

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.
/ r! ?; j0 w/ X! |' Q; `
"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.

As 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