Dave Larock in Monday Interest Rate Update, Mortgages and Finance, Home Buying, Toronto Real Estate News Editor's Note: Dave's Monday Morning Interest Rate Update appears on Move Smartly weekly. Check back weekly for analysis that is always ahead of the pack.
Last week two Bank of Montreal (BMO) economists, Douglas Porter and Benjamin Reitzes issued a report on mortgage rates arguing that “the fixed rate option now looks superior” to equivalent variable-rate alternatives.
I read this report with interest because I write about what’s happening with rates on a regular basis and my clients invariably ask for my take on the fixed versus variable debate at some point during their mortgage application process.
In today’s post I will examine the arguments that these economists used in reaching their conclusion, and offer my take on their findings:
Assumption #1: “The U.S. economy [is] poised to accelerate.”
The BMO economists’ main argument in favour of fixed rates centres around “the improving outlook for the North American economy”, and particularly the belief that “the U.S. economy [is] poised to accelerate.”
The consensus has certainly become much more bullish about the strength of the U.S. economic recovery of late, and we have started to see more encouraging economic data, but I have not yet come around to this evolving view for the following reasons: