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

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.
& v, }- i, c8 l1 s
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.
/ Q! l0 ?4 \, ?
4 N6 N* c4 c, c6 K! x2 [) v6 C* QA fixed rate locks the borrower into a set interest rate for a certain period of time.
7 E( j; Q  p( I
% }3 m% v: S' GThat gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.

Variable rates change along with interest-rate moves.
9 J, V7 b; F) v7 R: u. _
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.

8 a3 w8 H3 b/ S3 }1 L$ vBMO 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.

1 B' t; E. [; ~2 w- N"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.
* v3 l$ N+ z4 p5 W& t- [2 H  K1 g
, g: n) L$ ^! R+ P9 e"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."
; q' L) ^9 C( x! x" {
; F7 U2 {1 l5 _& K, a0 eCanada has been in a long-term declining rate environment since the early 1980s, the bank suggested.
9 g9 F: @% A; \
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