Abstract
Today, economists believe the 30 yr mortgage is outdated.
U.S. leads world in using the 30 yr mortgage, but not in home ownership:
American homeownership is at 67% and falling.
Government started 20 year mortgage during the depression to help homeowners.
In 1948, the term was extended to 30 years. The 30 yr fixed mortgage meant low payments and affordability for most working Americans. The introduction of the 30 yr mortgage lead to a home buying boom because after the depression everyone was eager to finally be a homeowner and it was now more affordable than ever. Hence, the suburbs were born around this time.
Today, economists believe the 30 yr mortgage is outdated.
U.S. leads world in using the 30 yr mortgage, but not in home ownership:
U.S. vs. the world
| % fixed | Homeownership % | |
| Spain | <1% | 85% |
| U.S. | 90% | 67% |
| Japan | 21% | 60% |
| Canada | 10% | 69% |
In the U.S., people spend more and don’t necessarily get a good bang for their buck.
Also, America is nearly alone in not charging a fee for not paying mortgages early
America is also liberal in making money put towards mortgage interest, tax deductible.
Relative to the rest of the world, Americans have a sweet deal when it comes to buying their homes.
The government is the one who picks up the tab and accommodates this homebuying structure.
If we take the government out of housing, buyers will face shorter loans, higher interest rates, higher payments, and less affordability.
the 30 year mortgage = affordability. Without it, will Americans be able to buy homes?
The big question: Can we have the 30 yr mortgage without the government guarantee behind it?
The Canadian structure is very different, should we model our system after them?
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