4 ms·

Not sure about the US but fixed-rate term in Australia is about 5 years. Nobody would give you a 30 year fixed rate. You'd eventually have to pay 6% on the $1M

Not sure about the US but fixed-rate term in Australia is about 5 years. Nobody would give you a 30 year fixed rate. You'd eventually have to pay 6% on the $1M.

moosedev 5y ago
30 year fixed rate is actually the “normal”/common mortgage in the US. I moved to the US from the UK, where mortgages look more like Australia’s, and I still find it amazing you can fix such a low rate for so long here.
- aidenn0 5y ago
  The weird thing is that 5 year adjustable rates are higher then 30yr. fixed. That only makes sense if interest rates will go down over the next 5 years, which seems unlikely to me.
  - hapless 5y ago
    Fixed-rate mortgages are government-subsidized by a range of mechanisms (Fannie, Freddie, FHA, etc) Adjustable-rate mortgages are not.
    - JackFr 5y ago
      As a banker I am perfectly indifferent whether I make a fixed rate loan or a an adjustable rate loan to the borrower. I look my cost of funds, tack on my spread and that is the price you pay.
  - elif 5y ago
    If you look at it from the bank's perspective it makes more sense. I got a 5 year and paid it off early. The bank got about 8% of my home value. My friend has a 30 year and the bank will get ~110% of his home value.
    - aidenn0 5y ago
      This is for 30 year 5/1 ARMs the term is the same, but the rate is not locked
- zhte415 5y ago
  The Macs drove subsidising the moral hazard of fixed rate loans into the public conscious, a subsidy for home owners, political suicide to take away. Better (politically) to rob from a generation or two to pay for reckless low interest rates.
- hapless 5y ago
  Fixed rate mortgages are subsidized by the US government, that's why. The mechanism of the subsidy is extremely complicated, but it is not a small effect. Before the creation of the enormous state-owned insurance corporations and government programs to drive down those fixed rate mortgage costs, American mortgages were usually short-term, with giant balloon payments. Those short-term, balloon-payment mortgages went bust in huge numbers during the Great Depression, creating pressure on the government to "do something." Say what you will about American housing policy, but those 15- and 30-year mortgage arrangements are very stable.
sbakzbsmx 5y ago
Ya, the US has fixed 30 year rates. Interest rates are higher going from a 15 year to a 30 year to price in some of the risk to the bank. The difference every time I bought a house was about 1%
- mywittyname 5y ago
  The difference between a 15- and 30-year mortgage is around one percentage point, or a 30% difference.
farmerstan 5y ago
I have a 30 year fixed rate mortgage of 2.375%. In the US, 30 year fixed is common.
sbakzbsmx 5y ago
@moosedev Ya, my dad in Canada keeps encouraging me to buy property given the mortgages. Has its downsides, but over all its brilliant.
jrochkind1 5y ago
Damn, I would assume houses must be much cheaper in Australia than in the US? Or only the very very rich can afford to buy their own home? (Or is it amortized over more than 5 years, you just have a balloon you need to refinance?) In the US, where 30-year mortgages are standard, the LARGE majority of homeowners would not be able to afford payments on their home amortized over only 5 years.
- firecall 5y ago
  I dont have information that can compare Apples to Apples as such, as in US vs AU values. But I can say that prices are rising rapidly here in Australia. The already expensive Sydney market rose on average ~$1200 a day over the last quarter! Melbourne isn't far behind! We too have low interest rates! Whats not clear is how people are paying for the houses. Where is the money for deposits coming from, and how are they servicing such huge loans? Dual incomes and parents assisting would account for a lot of it. But what happens if/when the parents need the money back and the DINKies decide to have children and either lose the dual income or get slugged with child care fees! https://www.theguardian.com/business/grogonomics/2021/sep/16/australias-house-prices-are-disconnected-from-reality-and-the-rba-wants-you-to-know-it-isnt-to-blame https://www.theguardian.com/business/grogonomics/2021/sep/16...
- perl4ever 5y ago
  I don't know about Australia, but it sounds like the comment you responded is saying that mortgages there are something like a US 5/1 ARM, not that they are paid off in five years. That is, the interest rate is guaranteed for five years and then it periodically adjusts.
  - xyzzy123 5y ago
    Yes, this.
- foldingmoney 5y ago
  >Damn, I would assume houses must be much cheaper in Australia than in the US? The median home price in Australia is about US$725k. So no.

Not sure about the US but fixed-rate term in Australia is about 5 years. Nobody would give you a 30 year fixed rate. You'd eventually have to pay 6% on the $1M.

moosedev 5y ago

30 year fixed rate is actually the “normal”/common mortgage in the US. I moved to the US from the UK, where mortgages look more like Australia’s, and I still find it amazing you can fix such a low rate for so long here.

aidenn0 5y ago
The weird thing is that 5 year adjustable rates are higher then 30yr. fixed. That only makes sense if interest rates will go down over the next 5 years, which seems unlikely to me.
- hapless 5y ago
  Fixed-rate mortgages are government-subsidized by a range of mechanisms (Fannie, Freddie, FHA, etc) Adjustable-rate mortgages are not.
  - JackFr 5y ago
    As a banker I am perfectly indifferent whether I make a fixed rate loan or a an adjustable rate loan to the borrower. I look my cost of funds, tack on my spread and that is the price you pay.
- elif 5y ago
  If you look at it from the bank's perspective it makes more sense. I got a 5 year and paid it off early. The bank got about 8% of my home value. My friend has a 30 year and the bank will get ~110% of his home value.
  - aidenn0 5y ago
    This is for 30 year 5/1 ARMs the term is the same, but the rate is not locked
zhte415 5y ago
The Macs drove subsidising the moral hazard of fixed rate loans into the public conscious, a subsidy for home owners, political suicide to take away. Better (politically) to rob from a generation or two to pay for reckless low interest rates.
hapless 5y ago
Fixed rate mortgages are subsidized by the US government, that's why. The mechanism of the subsidy is extremely complicated, but it is not a small effect. Before the creation of the enormous state-owned insurance corporations and government programs to drive down those fixed rate mortgage costs, American mortgages were usually short-term, with giant balloon payments. Those short-term, balloon-payment mortgages went bust in huge numbers during the Great Depression, creating pressure on the government to "do something." Say what you will about American housing policy, but those 15- and 30-year mortgage arrangements are very stable.

sbakzbsmx 5y ago

Ya, the US has fixed 30 year rates. Interest rates are higher going from a 15 year to a 30 year to price in some of the risk to the bank. The difference every time I bought a house was about 1%

mywittyname 5y ago
The difference between a 15- and 30-year mortgage is around one percentage point, or a 30% difference.

farmerstan 5y ago

I have a 30 year fixed rate mortgage of 2.375%. In the US, 30 year fixed is common.

sbakzbsmx 5y ago

@moosedev Ya, my dad in Canada keeps encouraging me to buy property given the mortgages. Has its downsides, but over all its brilliant.

jrochkind1 5y ago

Damn, I would assume houses must be much cheaper in Australia than in the US? Or only the very very rich can afford to buy their own home? (Or is it amortized over more than 5 years, you just have a balloon you need to refinance?) In the US, where 30-year mortgages are standard, the LARGE majority of homeowners would not be able to afford payments on their home amortized over only 5 years.

firecall 5y ago
I dont have information that can compare Apples to Apples as such, as in US vs AU values. But I can say that prices are rising rapidly here in Australia. The already expensive Sydney market rose on average ~$1200 a day over the last quarter! Melbourne isn't far behind! We too have low interest rates! Whats not clear is how people are paying for the houses. Where is the money for deposits coming from, and how are they servicing such huge loans? Dual incomes and parents assisting would account for a lot of it. But what happens if/when the parents need the money back and the DINKies decide to have children and either lose the dual income or get slugged with child care fees! https://www.theguardian.com/business/grogonomics/2021/sep/16/australias-house-prices-are-disconnected-from-reality-and-the-rba-wants-you-to-know-it-isnt-to-blame https://www.theguardian.com/business/grogonomics/2021/sep/16...
perl4ever 5y ago
I don't know about Australia, but it sounds like the comment you responded is saying that mortgages there are something like a US 5/1 ARM, not that they are paid off in five years. That is, the interest rate is guaranteed for five years and then it periodically adjusts.
- xyzzy123 5y ago
  Yes, this.
foldingmoney 5y ago
>Damn, I would assume houses must be much cheaper in Australia than in the US? The median home price in Australia is about US$725k. So no.