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

郭森房贷

Fri Oct 23, 5:12 PM
, h4 H! r: ^' c& Q6 [By The Canadian Press

8 \% f2 t1 t( z) A6 wTORONTO - 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.
0 {: z2 l/ ?0 F2 [: a/ Z3 c
3 o. Y6 z* w1 d7 d9 B4 @. }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.

, Q& W1 F, j8 t3 C# u, KThat gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.

$ u4 x7 c2 r: |" [) y! B. z" TVariable rates change along with interest-rate moves.
, G6 m2 @+ ?8 b7 @
' A8 H& e- o# q2 Y6 }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.
) `4 k' U5 W# O8 {& O% A
# D; S$ _( T- l5 D7 n" b2 Y  }3 @  }% mBMO 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.
8 g; V7 l# w/ F+ D, t
" c* H. w- g% }# q5 G. f7 lThe bank added that the current interest environment is similar to both of these periods.

"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.

) h0 L- S' X# D# O& M) j( r"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."

Canada has been in a long-term declining rate environment since the early 1980s, the bank suggested.

7 C, h8 m  t2 QAs 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