5 ms·

God I wish we had 30 year fixed mortgages here in Australia. Imagine getting one of those during covid when rates were below 3%. Incredible.

by msuniverse2026 11mo ago

mhashemi 11mo ago
Haha, wait until you hear about our fancy 50-year mortgages we'll be getting any day now! But seriously, my favorite discovery when researching CU mortgages is the prevalence of the 15/15 ARM. It's fixed for 15 years, and then adjusts once. Most people refinance within 7 years, or move within 12. So it's like a 30Y fixed, but comes in at 20 basis points cheaper (0.2% lower APR).
- theendisney 11mo ago
  It could be much longer if there was a sensible formula to predict remaining value. Construction quality plays to small a role in valuations.
denimnerd42 11mo ago
just makes the prices higher... you qualify for a house based on ratio of income to payment. so the demand is heavily influenced by the type of financing available.. Other than natural demand, Australia has a high real estate market due to the tax and a superannuation/pension distortions. Should try to fix those first. (probably impossible)
- cortesoft 11mo ago
  And as I pointed out in a sibling comment, it can lock you into your house if interest rates go up. We can’t afford to sell our house because the extra interest costs would increase our monthly payment by 50% even if the house cost the exact same as our current one.
  - smeej 11mo ago
    I still don't understand how this means you "can't afford to sell your house." It just means you can't afford to buy another house at the same price as the one you have now. That's a different problem, and one that doesn't actually have anything to do with the interest rate on your existing mortgage. You can't afford to buy a house today at the same price that you could on the date you closed on your current house, but that's true regardless of the interest rate on the current house. Let's put a number on it. Since the article uses $400k as a reference point, let's use that. You could afford to buy a $400k house back when you bought your current house. You cannot afford to buy a $400k house today. That would be true whether or not you had purchased your current house, and regardless of the interest rate on its mortgage if you had. You only "can't afford to sell your house" if you're underwater on the mortgage and can't come up with the money to sell it.
    - cortesoft 11mo ago
      Yes, what you say is technically correct. We feel trapped because we would have to massively downgrade to move. Obviously, we COULD do that, but we don't want to. You are right, we also couldn't afford to buy our current house if we currently didn't own a home, either. I am arguing that the fixed thirty year mortgages artificially drives up prices, which means that you are stuck and can't move whenever interest rates are high. If we didn't have the fixed thirty year mortgages, housing prices would have never gotten so high, and buying and selling houses would be a lot easier, and people could move to where they want to be much easier.
      - smeej 11mo ago
        Fixed-rate 30-year mortgages have been around for generations now. They're long since priced into the market. Whether any specific person actually thinks through whether spending as much money as the bank will lend is prudent, instead of buying a house they can actually afford, saving the money, and upgrading later, is a different question. But it's not fair to blame the mortgage itself.
        11mo ago
cortesoft 11mo ago
There are downsides. I have a really great rate on my mortgage, but our house is super expensive and small for our family… but now we can’t afford to move. If we moved to a new house, we would have to pay off this great mortgage and get a new one, at a much higher interest rate. Even if we found a house that cost the exact same as ours, the monthly payment would be 50% higher, because current interest rates are more than twice what we have. We are locked into our house.
- HPsquared 11mo ago
  Do 30-year mortgages make the other houses more expensive somehow? It sounds like you got a good deal and any change would be worse than the good deal you got. I'd appreciate it if I was you. Edit: unless you mean that the downside of 30-year mortgages is you hardly get to pay off the principal in the first several years and don't build much equity maybe? That's more a "long mortgages" thing.
  - cortesoft 11mo ago
    I appreciate the good deal we have, but my point is that long term fixed mortgages really complicates the housing market and can make it so you are stuck where you are, especially if you buy a house when rates are low. Think about what happens. My wife and I wanted to buy a house. Our budget is mostly around what we can afford as our monthly payment, just like everyone else. That means if interest rates are low, we can afford a much more expensive house (obviously). Ok, so we buy one with a payment we are comfortable with. Now, rates go up. Say we need to move for a job, so we need a new house, and we still have the same budget. Well, that means the total cost of the house we can afford is much lower, because the higher interest rates means the total loan value must be much smaller to keep our monthly rate the same. If we were first time buyers, this is fine, because everyone is in the same boat; everyone has a smaller budget because monthly payments on the mortgage are higher, so housing prices should be lower. If that is the case, though, it means the house we are trying to sell won't sell for as much (because mortgages for house will cost people more), which means we would end up taking a loss on our mortgage (because even though our monthly payment is the same as the new loan, the total value of the old loan is a lot higher). Of course, prices for houses don't move nearly as much when interest rates change as they should (relative to mortgage purchasing power). This is for many reasons, but part of it is because when rates are high, people (like me) don't want to sell their house and have to lose their really good mortgage, so fewer houses are on the market, which inflates prices. When rates go down, more people want to buy and sell houses, because they can both get more for their house they are selling and they can afford bigger mortgages on their new houses, which inflate prices. Basically, this lack of mortgage liquidity works to keep housing prices high. When rates are high, no one wants to sell OR buy, and when rates are low, everyone wants to sell AND buy. Both result in prices being high. 30 year fixed mortgages are just a really weird financial product that has all sorts of market disrupting effects. You can pre-pay them whenever you want, so when rates are low, high rate loans are paid off and low rate loans replace them, but that means no one wants to sell their house and lose their great loan when rates are high. This means housing prices soar when rates are low, but don't come back down when rates are high. It creates a ratcheting effect on house prices, which is why so few people are able to buy houses. This continues until the entire market collapses, like it did in 2007, and then the process repeats.
IceDane 11mo ago
I have friends on 1% fixed rates over 30 here in Denmark. Bastards.
- pkaye 11mo ago
  Doesn't Denmark allow to move your mortgage rate to another house? That is even better than the US.
venturecruelty 11mo ago
Listen. I'm sure they seemed like a good idea at the time, but we tied them to retirement (so your entire material wealth is stuck in an illiquid asset that also falls apart slowly over time), and now we can't build any new housing because people think it will affect their golden years. Learn from our mistakes.
jackfranklyn 11mo ago
[flagged]

God I wish we had 30 year fixed mortgages here in Australia. Imagine getting one of those during covid when rates were below 3%. Incredible.

mhashemi 11mo ago

Haha, wait until you hear about our fancy 50-year mortgages we'll be getting any day now! But seriously, my favorite discovery when researching CU mortgages is the prevalence of the 15/15 ARM. It's fixed for 15 years, and then adjusts once. Most people refinance within 7 years, or move within 12. So it's like a 30Y fixed, but comes in at 20 basis points cheaper (0.2% lower APR).

theendisney 11mo ago
It could be much longer if there was a sensible formula to predict remaining value. Construction quality plays to small a role in valuations.

denimnerd42 11mo ago

just makes the prices higher... you qualify for a house based on ratio of income to payment. so the demand is heavily influenced by the type of financing available.. Other than natural demand, Australia has a high real estate market due to the tax and a superannuation/pension distortions. Should try to fix those first. (probably impossible)

cortesoft 11mo ago
And as I pointed out in a sibling comment, it can lock you into your house if interest rates go up. We can’t afford to sell our house because the extra interest costs would increase our monthly payment by 50% even if the house cost the exact same as our current one.
- smeej 11mo ago
  I still don't understand how this means you "can't afford to sell your house." It just means you can't afford to buy another house at the same price as the one you have now. That's a different problem, and one that doesn't actually have anything to do with the interest rate on your existing mortgage. You can't afford to buy a house today at the same price that you could on the date you closed on your current house, but that's true regardless of the interest rate on the current house. Let's put a number on it. Since the article uses $400k as a reference point, let's use that. You could afford to buy a $400k house back when you bought your current house. You cannot afford to buy a $400k house today. That would be true whether or not you had purchased your current house, and regardless of the interest rate on its mortgage if you had. You only "can't afford to sell your house" if you're underwater on the mortgage and can't come up with the money to sell it.
  - cortesoft 11mo ago
    Yes, what you say is technically correct. We feel trapped because we would have to massively downgrade to move. Obviously, we COULD do that, but we don't want to. You are right, we also couldn't afford to buy our current house if we currently didn't own a home, either. I am arguing that the fixed thirty year mortgages artificially drives up prices, which means that you are stuck and can't move whenever interest rates are high. If we didn't have the fixed thirty year mortgages, housing prices would have never gotten so high, and buying and selling houses would be a lot easier, and people could move to where they want to be much easier.
    - smeej 11mo ago
      Fixed-rate 30-year mortgages have been around for generations now. They're long since priced into the market. Whether any specific person actually thinks through whether spending as much money as the bank will lend is prudent, instead of buying a house they can actually afford, saving the money, and upgrading later, is a different question. But it's not fair to blame the mortgage itself.
      - 11mo ago

cortesoft 11mo ago

There are downsides. I have a really great rate on my mortgage, but our house is super expensive and small for our family… but now we can’t afford to move. If we moved to a new house, we would have to pay off this great mortgage and get a new one, at a much higher interest rate. Even if we found a house that cost the exact same as ours, the monthly payment would be 50% higher, because current interest rates are more than twice what we have. We are locked into our house.

HPsquared 11mo ago
Do 30-year mortgages make the other houses more expensive somehow? It sounds like you got a good deal and any change would be worse than the good deal you got. I'd appreciate it if I was you. Edit: unless you mean that the downside of 30-year mortgages is you hardly get to pay off the principal in the first several years and don't build much equity maybe? That's more a "long mortgages" thing.
- cortesoft 11mo ago
  I appreciate the good deal we have, but my point is that long term fixed mortgages really complicates the housing market and can make it so you are stuck where you are, especially if you buy a house when rates are low. Think about what happens. My wife and I wanted to buy a house. Our budget is mostly around what we can afford as our monthly payment, just like everyone else. That means if interest rates are low, we can afford a much more expensive house (obviously). Ok, so we buy one with a payment we are comfortable with. Now, rates go up. Say we need to move for a job, so we need a new house, and we still have the same budget. Well, that means the total cost of the house we can afford is much lower, because the higher interest rates means the total loan value must be much smaller to keep our monthly rate the same. If we were first time buyers, this is fine, because everyone is in the same boat; everyone has a smaller budget because monthly payments on the mortgage are higher, so housing prices should be lower. If that is the case, though, it means the house we are trying to sell won't sell for as much (because mortgages for house will cost people more), which means we would end up taking a loss on our mortgage (because even though our monthly payment is the same as the new loan, the total value of the old loan is a lot higher). Of course, prices for houses don't move nearly as much when interest rates change as they should (relative to mortgage purchasing power). This is for many reasons, but part of it is because when rates are high, people (like me) don't want to sell their house and have to lose their really good mortgage, so fewer houses are on the market, which inflates prices. When rates go down, more people want to buy and sell houses, because they can both get more for their house they are selling and they can afford bigger mortgages on their new houses, which inflate prices. Basically, this lack of mortgage liquidity works to keep housing prices high. When rates are high, no one wants to sell OR buy, and when rates are low, everyone wants to sell AND buy. Both result in prices being high. 30 year fixed mortgages are just a really weird financial product that has all sorts of market disrupting effects. You can pre-pay them whenever you want, so when rates are low, high rate loans are paid off and low rate loans replace them, but that means no one wants to sell their house and lose their great loan when rates are high. This means housing prices soar when rates are low, but don't come back down when rates are high. It creates a ratcheting effect on house prices, which is why so few people are able to buy houses. This continues until the entire market collapses, like it did in 2007, and then the process repeats.

IceDane 11mo ago

I have friends on 1% fixed rates over 30 here in Denmark. Bastards.

pkaye 11mo ago
Doesn't Denmark allow to move your mortgage rate to another house? That is even better than the US.

venturecruelty 11mo ago

Listen. I'm sure they seemed like a good idea at the time, but we tied them to retirement (so your entire material wealth is stuck in an illiquid asset that also falls apart slowly over time), and now we can't build any new housing because people think it will affect their golden years. Learn from our mistakes.

jackfranklyn 11mo ago

[flagged]