4 ms·

The us is unusual in offering fixed rates that are fixed for 30 years. They mean fixed rate.

gedy 4y ago
And to OP, fixed meaning the rate does not change for entire loan. I've heard some non US folks describe their mortgages as "fixed", but only for a few years.
- pridkett 4y ago
  This is more of a problem in terms of how people understand their product - which is to say, it’s difficult to understand. Many people have adjustable rate mortgages which have a low initial rate for 1, 3, 5, 7, etc years after which point it floats. These mortgages are good for people who believe they will sell their home within the time interval or, occasionally, the person who believes they will be able to refinance their mortgage. However, as prior to 2022, mortgage rates were super low and an ARM offered little advantage against a market where you could get a 2.25% 30yr fixed, the became slightly less common the last few years.
  - EdwardDiego 4y ago
    Holy crap, 2.25% fixed for 30 years? Wow.
- EdwardDiego 4y ago
  Thanks, how common are 30 year fixed mortgages? In NZ, I've never seen a bank offer a fixed rate for any longer than 5 years, and 5 years tends to be 1.5 - 2% above a 6/12 month fixed rate term.
  - pridkett 4y ago
    For the most part in the United States when people talk about mortgages and mortgage rate, they’re talking about the 30yr fixed rate mortgage. The United States government does a lot to prop up home ownership buy purchasing a lot of these loans so banks don’t keep them on the balance sheet. This is primarily done through Fannie Mae and Freddie Mac - both of which are government sponsored publicly traded organizations. They each have trillions of dollars of dollars under management ($4.23 and $3.03 trillion respectively). In 2008 these companies were “too big to fail”, which I think might’ve contributed to some sort of a short term economic hiccup. /s
isitmadeofglass 4y ago
What’s unusual about that? Seems widespread throughout the world.
- EdwardDiego 4y ago
  I don't think that exists in my country.
- michael1999 4y ago
  Canada and the UK tend to offer variable rate mortgages, or mortgages with rates fixed for terms of 1, 2, 3, 5 or 10 years, with corresponding premiums over variable based on the term risk. The US actually fixes the rate of the mortgage for the whole 25-30 year amortization period. That creates a LOT of funding risk for the lender, and generates a lot of the craziness in your mortgage market. Maybe a better way to say it, is every mortgage in Canada is what Americans would call an ARM.
  - isitmadeofglass 4y ago
    Canada has 25 year fixed rate mortgages too.
    - michael1999 4y ago
      Wow - TIL. I really hadn't ever seen that, but RBC clearly lists a 25 year fixed. I struggle to imagine someone so risk adverse they'd lock in at 9.75% vs a 6% 10-year, but it is definitely there. I signed a 10-year early on in my career, and have run variable ever since.

gedy 4y ago

And to OP, fixed meaning the rate does not change for entire loan. I've heard some non US folks describe their mortgages as "fixed", but only for a few years.

pridkett 4y ago
This is more of a problem in terms of how people understand their product - which is to say, it’s difficult to understand. Many people have adjustable rate mortgages which have a low initial rate for 1, 3, 5, 7, etc years after which point it floats. These mortgages are good for people who believe they will sell their home within the time interval or, occasionally, the person who believes they will be able to refinance their mortgage. However, as prior to 2022, mortgage rates were super low and an ARM offered little advantage against a market where you could get a 2.25% 30yr fixed, the became slightly less common the last few years.
- EdwardDiego 4y ago
  Holy crap, 2.25% fixed for 30 years? Wow.
EdwardDiego 4y ago
Thanks, how common are 30 year fixed mortgages? In NZ, I've never seen a bank offer a fixed rate for any longer than 5 years, and 5 years tends to be 1.5 - 2% above a 6/12 month fixed rate term.
- pridkett 4y ago
  For the most part in the United States when people talk about mortgages and mortgage rate, they’re talking about the 30yr fixed rate mortgage. The United States government does a lot to prop up home ownership buy purchasing a lot of these loans so banks don’t keep them on the balance sheet. This is primarily done through Fannie Mae and Freddie Mac - both of which are government sponsored publicly traded organizations. They each have trillions of dollars of dollars under management ($4.23 and $3.03 trillion respectively). In 2008 these companies were “too big to fail”, which I think might’ve contributed to some sort of a short term economic hiccup. /s

isitmadeofglass 4y ago

What’s unusual about that? Seems widespread throughout the world.

EdwardDiego 4y ago
I don't think that exists in my country.
michael1999 4y ago
Canada and the UK tend to offer variable rate mortgages, or mortgages with rates fixed for terms of 1, 2, 3, 5 or 10 years, with corresponding premiums over variable based on the term risk. The US actually fixes the rate of the mortgage for the whole 25-30 year amortization period. That creates a LOT of funding risk for the lender, and generates a lot of the craziness in your mortgage market. Maybe a better way to say it, is every mortgage in Canada is what Americans would call an ARM.
- isitmadeofglass 4y ago
  Canada has 25 year fixed rate mortgages too.
  - michael1999 4y ago
    Wow - TIL. I really hadn't ever seen that, but RBC clearly lists a 25 year fixed. I struggle to imagine someone so risk adverse they'd lock in at 9.75% vs a 6% 10-year, but it is definitely there. I signed a 10-year early on in my career, and have run variable ever since.