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

郭森房贷

Fri Oct 23, 5:12 PM
5 ~2 J: g& C! r) o. B- z. cBy The Canadian Press
/ `1 U: e4 S* x
1 I/ a% z6 {3 U& ?3 n% FTORONTO - 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.
, P# N* o+ p9 b" G- `
! d" H; |. U% S" Z5 Q% s8 KThe 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.

2 \1 [. ~# C6 c( o" f  M7 kA fixed rate locks the borrower into a set interest rate for a certain period of time.

9 m' N* ?, w. y. q) q; K: Y+ S$ _/ QThat gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.
6 G# z- |! o) U  i7 e' o1 i
$ g. ?+ w& N2 [% t9 ]Variable rates change along with interest-rate moves.

, s$ I; Z7 v9 o* oBMO 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.
/ Z0 z; h$ R2 F
% X# F9 s9 C- f$ oBMO 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.
( i  t" ^7 j& U2 T% c/ |2 S/ B
# o- V( `' [5 S+ }$ E9 `The 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.
. ?5 Y+ U  a: u0 N# M/ ?
# V! l! @+ d# M3 H"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."

) K2 S' U! Y  {4 d3 C8 f2 s9 ZCanada has been in a long-term declining rate environment since the early 1980s, the bank suggested.
2 B4 z4 t- W" q* s7 U) }3 q5 O
1 J, _- v  ]& u- rAs 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