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
# j$ q( `# F( X5 g
/ i& E) c+ n  j5 TTORONTO - 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.
8 v+ M! C1 ^9 f* t, M% k0 i5 \# B( a" J
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.

A fixed rate locks the borrower into a set interest rate for a certain period of time.
) n! W' i/ i4 c
" D, E3 n( t# A) R# L; U: \) v' x% ~That gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.

3 ?1 A% d9 G0 I5 C6 aVariable rates change along with interest-rate moves.

1 K& `: w/ s0 `& n8 ?8 W9 mBMO 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.
! Q, h! `" a$ W1 T2 l; @
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.

9 ]! G  \- m  p) c* eThe bank added that the current interest environment is similar to both of these periods.
5 y6 p+ W! j0 Q% A
8 L% f( W5 o5 K6 T; s: m% z# L2 ["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.
+ K! I; M/ S0 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."

& d4 N- t1 C$ @Canada has been in a long-term declining rate environment since the early 1980s, the bank suggested.
/ s+ n3 {6 ]3 W+ h$ L# w8 c
/ X1 Z7 `4 t* |0 O6 y  d. L, FAs 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