The Dominance of the U.S. 30-Year Fixed Rate Residential Mortgage. Issue 1 (31st December 2022)

• Record Type: Journal Article
• Authors: Kish, Richard J.
• Is Part Of: Journal of real estate practice and education. Volume 24:Issue 1(2022)
• Page Start: 1
• Page End: 16
• Publication Date: 2022-12-31
• Subjects: Mortgage -- fixed rate mortgage -- adjustable rate mortgage -- prepayment; Real estate business -- Study and teaching -- Periodicals; Real estate business -- Research -- Periodicals; 333.33071
• DOI: 10.1080/15214842.2020.1757357
• Languages: English
• ISSNs: 1930-8914

Abstract

Abstract: The United States (U.S.) is the only country in the world in which the 30-year fixed rate residential mortgage is the dominant home mortgage product. After reviewing mortgage offerings from a sample of countries to contrast their differences from the U.S. mortgage market, the key differential driving the U.S. market to the 30-year fixed rate mortgage is the active encouragement by government policy. This reinforcing promotion of the 30-year fixed rate mortgage is provided by government and "quasi" government institutions that guarantee the mortgage in the after-market. This guarantee coupled with the vast securitization of mortgages which require a standardization of the underlying product (of which the 30-year fixed rate mortgage is the largest sector) contributes to this dominance. Thus securitization, which allows lenders to offset interest rate and prepayment risks to the buyers of these securitized mortgage products, further drives the demand for more 30-year fixed rate offerings.