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

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发表于 2009-10-26 06:48 | 显示全部楼层 |阅读模式
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Fri Oct 23, 5:12 PM
* i8 _7 B6 z3 M( E. HBy The Canadian Press+ q) K# b% t4 d+ N: z9 h' l  A8 M
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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. 0 v) j% j% E9 P2 T9 a4 d2 M, n
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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. . p" f/ G) J& m% S, r- P! ?

! ], _* |7 i- k8 x  K+ k; rA fixed rate locks the borrower into a set interest rate for a certain period of time.
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That gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment. ) K' T5 c8 H, S& k; S/ e

+ |, i* ~& Z* u! x/ M- ^Variable rates change along with interest-rate moves. , A5 k5 Z, w' M5 X' g+ o  |
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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. # [) F. U# H& S8 F
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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.
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The bank added that the current interest environment is similar to both of these periods. ) k0 |3 M0 D& a+ E2 B5 O
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"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.
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"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."
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Canada has been in a long-term declining rate environment since the early 1980s, the bank suggested. / T, T, D, w7 {$ m, T* K2 G) w
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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.
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发表于 2009-10-26 11:28 | 显示全部楼层
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发表于 2009-12-2 14:02 | 显示全部楼层
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