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Could someone enlighten, why does Canada not have a 30 yr fixed interest rate mortgage like the US?
by nine_zeros 4y ago
Could someone enlighten, why does Canada not have a 30 yr fixed interest rate mortgage like the US?
- mabbo 4y agoIt's a bit of a half way point between variable rate mortgages and fixed 30-years that works better for everybody- most of the time. The banks are protected from whatever might happen a decade down the road. The homeowner has at least a few years of consistency. Usually, if rates have gone up a lot since the homeowner started the mortgage then they can refinance a new 30 year at the slightly lower principal remaining, cushioning the increase. It's only a bad thing if rates go up very suddenly, as we're seeing.
- nine_zeros 4y agoThe question is, why would some countries have 30 yr fixed and wouldn't other countries have them?
- pixodaros 4y agoFor the same reason why two countries have any policy difference? Unless something is obviously a good idea for all parties, it will only be enacted after a political struggle. The outcomes of political struggles are not deterministic. Often one jurisdiction tries a new policy, others look at it and see problems, but the first jurisdiction never gets around to fixing it.
- xuki 4y agoIn the US the banks write the loans and then offload them to Freddie and Fannie. So the gov is backstopping these loans and taking all the risks. There is no such thing in Canada and banks don’t want to take the risk (technically there are fixed loans but the interest rate is much much higher).