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

郭森房贷

Fri Oct 23, 5:12 PM
+ s) {# Q- E3 L9 J7 L! O( _By The Canadian Press
2 r3 Y1 U* n. M) Z. N
' \: \! X# w$ mTORONTO - 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 e3 l; t$ Z% G' i; y0 O
5 W' x- N* ?- l3 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.
5 P  U; @! y! [
. a' @+ F& ^0 E( b4 b7 |That gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.

, K5 y- J9 X- D* ]Variable rates change along with interest-rate moves.
7 e& r2 I. p2 P
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.
+ m0 k6 m; v' g& |) h- j4 I' {
* o% z% y! S) Q. L9 v# w) h7 Y: yBMO 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.
7 Y, Y9 s' s: s
The bank added that the current interest environment is similar to both of these periods.
6 ~! B. a2 P; {4 K9 D
; ?9 O3 _- W. x. _: P( {# |"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.
, I, k3 r9 `, q# ?/ S& z7 T4 ]
! k9 Q* o7 U* M6 r"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."
; m) H( b9 u/ B5 @9 w3 p) I
. a) t2 q9 U" V9 @Canada has been in a long-term declining rate environment since the early 1980s, the bank suggested.
4 ?/ I) y4 d* p. |/ d3 b' l
" X! L8 h0 ]; S0 t5 ^6 NAs 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