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
2 V9 Q% r6 a" s7 Y  n) }
# x; y/ G, p# DTORONTO - 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.
3 U# u5 Z1 y/ D8 o. w- g4 ?6 y
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.

# Y" ^* b0 h6 [. y$ tA fixed rate locks the borrower into a set interest rate for a certain period of time.
2 |6 J8 [4 \3 u5 Y
: u2 C& h8 G' T4 Y$ \That 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.

6 W6 i, s3 r' ?( }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.
- T5 a) s! D* ~& ?
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.
0 L6 V5 Y5 _# M) I1 }' _
The bank added that the current interest environment is similar to both of these periods.
! C+ ~0 Q4 f5 f9 z0 J+ @
"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.

- v' p4 o# q) d& h' o5 B"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."
  q9 U2 v+ I7 n+ h+ u! x) F4 e
Canada has been in a long-term declining rate environment since the early 1980s, the bank suggested.
7 [6 D# P! d% X) S; v7 l
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