5 ms·

That’s not what Americans mean by “fixed rate”. In US, that means 30, or more rarely 15 year mortgage, where the rate is fixed for entire duration. The mortgage

by xyzzyz 5y ago

That’s not what Americans mean by “fixed rate”. In US, that means 30, or more rarely 15 year mortgage, where the rate is fixed for entire duration. The mortgage where it’s only fixed for some initial period is called “adjustable rate mortgage”. Your comment just supported the person you replied to being correct, that fixed rate (in US sense) mortgage market is nonexistent in most of Europe.

the_mitsuhiko 5y ago
You can absolutely have a 30 year mortgage that is fixed all the way through. It's rare that people take it though, most opt to 5-10 years fixed with variable late afterwards from my own experience (Austria). The standard product used to be fixed rate.
namdnay 5y ago
In France 99% of mortgages are fixed rate, for the entire term.
IMSAI8080 5y ago
They're often called "lifetime fixes" or "fixed for term" in the UK. You can easily get them. The term customers choose is typically 25 years rather than 30. However they are currently running at an interest rate of a little under 4% which is much higher than the rate offered on a typical 5 year year fix. This makes them unattractive when you can just perpetually keep re-mortgaging on 5 year fixes.
- jjav 5y ago
  > However they are currently running at an interest rate of a little under 4% which is much higher than the rate offered on a typical 5 year year fix. This makes them unattractive when you can just perpetually keep re-mortgaging on 5 year fixes. Renewing after 5 years will presumably get you whatever rate is then? Which might be much higher. It's always better to get a fixed rate (for the life of the loan) mortgage. If rates go up, you're protected. If rates go down, you can refinance to cheaper rates.
  - IMSAI8080 5y ago
    Well it's an unknowable gamble. You might also be locking in an excessively high rate. The flexible approach of continuously re-mortgaging would have been the better strategy for the last 10 years with interest rates that went down. In the next 10 years, who knows.
    - jjav 5y ago
      > Well it's an unknowable gamble. You might also be locking in an excessively high rate. The flexible approach of continuously re-mortgaging would have been the better strategy for the last 10 years with interest rates that went down. There is no gamble, that's why it is almost a free lunch. If rates keep going down as last ~10 years, you're never locked in, you keep refinancing to a lower and lower rate. If rates go up, you stay put with a fixed rate that can't ever go up. You win both ways.
      - IMSAI8080 5y ago
        I didn't correctly read your comment sorry. I don't know about the US system, but here the fixes normally do have a lock-in typically on a ratchet system where they are expensive to exit in the early part of the loan and cheaper later. For example one I just checked charges you 5% of the loan to exit any time in the first 5 years and then 3% to exit any time in the next 5 years. There is also a significant discrepancy in the interest rates charged for different term lengths e.g. the offer presented may be 3.7% for a lifetime fix or 2.4% for a 5 year. So you're paying 1.3% extra for the lifetime fix right out of the gate. So the gamble is will 5 year fixes cost more than 3.7% in 5 years time? If not, then you won on the 5 year fix.
        jjav 5y ago
        I see, interesting! Agreed, on such a system it becomes more of a gamble to pick what might be best long term. In the USA there is no penalty to pay off a loan and refinance (there might be exceptions but never seen one) so you can do it at any time as frequently as you like and keep ratcheting the rates down. There's also not such a huge difference. Looking at zillow today, 30-year fixed shows 4.95% and a 7-year adjustable at 4.81%

by xyzzyz 5y ago

the_mitsuhiko 5y ago

You can absolutely have a 30 year mortgage that is fixed all the way through. It's rare that people take it though, most opt to 5-10 years fixed with variable late afterwards from my own experience (Austria). The standard product used to be fixed rate.

namdnay 5y ago

In France 99% of mortgages are fixed rate, for the entire term.

IMSAI8080 5y ago

They're often called "lifetime fixes" or "fixed for term" in the UK. You can easily get them. The term customers choose is typically 25 years rather than 30. However they are currently running at an interest rate of a little under 4% which is much higher than the rate offered on a typical 5 year year fix. This makes them unattractive when you can just perpetually keep re-mortgaging on 5 year fixes.

jjav 5y ago
> However they are currently running at an interest rate of a little under 4% which is much higher than the rate offered on a typical 5 year year fix. This makes them unattractive when you can just perpetually keep re-mortgaging on 5 year fixes. Renewing after 5 years will presumably get you whatever rate is then? Which might be much higher. It's always better to get a fixed rate (for the life of the loan) mortgage. If rates go up, you're protected. If rates go down, you can refinance to cheaper rates.
- IMSAI8080 5y ago
  Well it's an unknowable gamble. You might also be locking in an excessively high rate. The flexible approach of continuously re-mortgaging would have been the better strategy for the last 10 years with interest rates that went down. In the next 10 years, who knows.
  - jjav 5y ago
    > Well it's an unknowable gamble. You might also be locking in an excessively high rate. The flexible approach of continuously re-mortgaging would have been the better strategy for the last 10 years with interest rates that went down. There is no gamble, that's why it is almost a free lunch. If rates keep going down as last ~10 years, you're never locked in, you keep refinancing to a lower and lower rate. If rates go up, you stay put with a fixed rate that can't ever go up. You win both ways.
    - IMSAI8080 5y ago
      I didn't correctly read your comment sorry. I don't know about the US system, but here the fixes normally do have a lock-in typically on a ratchet system where they are expensive to exit in the early part of the loan and cheaper later. For example one I just checked charges you 5% of the loan to exit any time in the first 5 years and then 3% to exit any time in the next 5 years. There is also a significant discrepancy in the interest rates charged for different term lengths e.g. the offer presented may be 3.7% for a lifetime fix or 2.4% for a 5 year. So you're paying 1.3% extra for the lifetime fix right out of the gate. So the gamble is will 5 year fixes cost more than 3.7% in 5 years time? If not, then you won on the 5 year fix.
      - jjav 5y ago
        I see, interesting! Agreed, on such a system it becomes more of a gamble to pick what might be best long term. In the USA there is no penalty to pay off a loan and refinance (there might be exceptions but never seen one) so you can do it at any time as frequently as you like and keep ratcheting the rates down. There's also not such a huge difference. Looking at zillow today, 30-year fixed shows 4.95% and a 7-year adjustable at 4.81%