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

郭森房贷

Fri Oct 23, 5:12 PM
; t& z6 x5 |3 n0 ?, H- ~By The Canadian Press
; [2 y" P1 _$ G* a& H9 M) X) }
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.
5 K# w/ S9 z- `7 h/ w5 B& w
The 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.

2 |+ \6 U6 U. GA fixed rate locks the borrower into a set interest rate for a certain period of time.

That gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.
$ N( \/ G1 T, r8 t2 ~6 I% I
& n. p( ?$ [0 ]' }Variable rates change along with interest-rate moves.

  f% a  S, x: \$ T: FBMO 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.
; L2 l, v( S7 M  n: l( G6 q
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.

  M. v5 ?# c" K' \+ wThe bank added that the current interest environment is similar to both of these periods.
0 \, |, Q# w: y# R* r/ y8 T
- J" B+ j! X  X8 h7 Q5 q; Q"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.
' }' J) u9 [. v# {2 d: \+ u
"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.
3 l) K" j; W: x$ f' s3 F! B( R6 ]
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