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No - a fixed rate mortgage, which can be paid off early without penalty, refinanced at any time, and fully backstopped by the US government, is a luxury only po
by monero-xmr 4y ago
No - a fixed rate mortgage, which can be paid off early without penalty, refinanced at any time, and fully backstopped by the US government, is a luxury only possible because of subsidy. A free market for mortgages would not enable such a product, or at least not with such amenable terms.
- ClumsyPilot 4y ago> A free market for mortgages would not enable such a product The complaint doesnt make sence. 'Free market' does not set fiscal policy or manage base interest rates at all. There is no subsidy - If you take a 2% mortgage and suddenly base rate goes up to 20%, the taxpayer does not pay 18%. The government would be paying itself.
- monero-xmr 4y agoThe terms are such that the government has to backstop them because the risk is not commensurate with the terms
- cmrdporcupine 4y agoIndeed, a 30 year fixed is an oddity of the US market, not really present elsewhere. In Canada, and other G7 countries, the rate cannot be typically fixed beyond a 3 or 5 year period. The rate is then renegotiated at the end of that term. That said, our housing markets don't look that different from the US. In fact it's worse in Canada, with housing prices escalating far beyond the affordability graph without correction, in metro areas it looks worse than many places in the US. A minor correction may be happening now, but nothing drastic. So I don't think the rate structure of US mortgages is implicated in price inflation. It's deeper structural aspects of western economies right now.
- kgwgk 4y agoIn fact the oddity is the « can be paid off early without penalty » part that makes them popular.