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
6 C$ C- N+ j7 N  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.
$ x+ ~& s; _: H
& N. ]* g! l+ d3 u* f0 ]5 i! S, u1 s0 \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.
% m( z8 f* w# l/ |' K" H
  ~4 U4 a. s0 y* A, b3 uA fixed rate locks the borrower into a set interest rate for a certain period of time.
$ Z4 B: G3 {/ E1 u3 t; L  `
That gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.

; o- Q1 J0 Y% I& W; jVariable rates change along with interest-rate moves.

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.
! \# q9 b0 w: ]8 K
1 q, w* X# C* W( K3 i$ FBMO 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.

% b  p, x; P7 Y# g! m, CThe 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.
+ N. v1 q2 w; c1 u% G' h9 d- {
"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.

- d) J9 V9 Q! ^/ KAs 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