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BMO Puts More Weight Behind Fixed Rates

BMOBMO issued a release yesterday reiterating how variable-rate mortgages have outperformed fixed mortgages 82% of the time in the last 30 years. 

BMO then went on to suggest that we may be in one of those infrequent periods where a fixed rate could win out. It said:

  • “Canada has been in a long-term declining rate environment since the early 1980s.”
  • “The Bank of Canada's overnight rate is now as low as it can go, so there is no further downside for variable rates. The surprises can only be to the high side from here.”
  • “Fixed rates were advantageous during only two recent periods – through the late 1970s and in the late 1980s; in both cases ahead of a period of rising interest rates, as is the case now.”

Fixed-Variable-MortgagesAfter qualifying its position with the risks of going fixed, BMO ends by saying, “BMO Economics' view is that variable rates will climb only moderately, but by enough to tilt the balance in favour of current fixed rates.”

So it appears BMO’s scale has now tipped to the other side because its October rate analysis gave the edge to variable mortgage rates.

This is an interesting shift by a major player.