4 ms·

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 f

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.

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.