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

郭森房贷

Fri Oct 23, 5:12 PM
# L1 B& y& A6 B7 R" G5 jBy The Canadian Press

3 x3 f5 k$ j, LTORONTO - 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.

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.

; i. O5 o  |& q. \0 x1 ^$ X2 X% K/ n& DA fixed rate locks the borrower into a set interest rate for a certain period of time.

' r, {$ \, ~0 pThat gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.

# J0 }" ]8 `- I3 K' fVariable rates change along with interest-rate moves.
5 O0 i! j% V: F: t0 ^
3 `; X5 |9 a2 Q/ J6 \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.

+ l* A# d, ]' g, V5 Z& G4 [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.

3 e5 J1 y( }8 lThe bank added that the current interest environment is similar to both of these periods.
. Q7 A4 z$ v6 c* v* _* t( T
"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.
* `. [5 ^/ ?0 X# 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."

" Z  p: [# x3 R4 O8 bCanada has been in a long-term declining rate environment since the early 1980s, the bank suggested.
# ^9 W% A( u" @: q
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