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

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发表于 2009-10-26 06:48 | 显示全部楼层 |阅读模式
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Fri Oct 23, 5:12 PM
0 q7 i7 ~- y9 X2 e+ M: \By The Canadian Press
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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. % O# c; D+ d' y; k

2 `) S2 H/ K: {/ H7 s" YThe 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. 8 g7 U9 H" o) V* n  w/ I1 X; x( W
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A fixed rate locks the borrower into a set interest rate for a certain period of time. 3 K5 k  a/ A) Y3 f8 m  N
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That gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.
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Variable rates change along with interest-rate moves. 0 F# Y# W- p6 r6 `5 [( }

) I0 l- ?/ P# yBMO 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 y+ o; {: T; }' x9 C" ~0 v
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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.
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The bank added that the current interest environment is similar to both of these periods. ( s7 N9 @( R* Y* c" u1 d
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"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.
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& O: E" ^3 T" }$ T' m) c"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." $ ]; d, k4 @) M* H1 y
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Canada has been in a long-term declining rate environment since the early 1980s, the bank suggested. ' l$ {8 e1 D2 O! L  s8 t9 p0 s! A
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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.
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发表于 2009-10-26 11:28 | 显示全部楼层
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发表于 2009-12-2 14:02 | 显示全部楼层
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