And to OP, fixed meaning the rate does not change for entire loan. I've heard some non US folks describe their mortgages as "fixed", but only for a few years.
This is more of a problem in terms of how people understand their product - which is to say, it’s difficult to understand. Many people have adjustable rate mortgages which have a low initial rate for 1, 3, 5, 7, etc years after which point it floats.
These mortgages are good for people who believe they will sell their home within the time interval or, occasionally, the person who believes they will be able to refinance their mortgage.
However, as prior to 2022, mortgage rates were super low and an ARM offered little advantage against a market where you could get a 2.25% 30yr fixed, the became slightly less common the last few years.
Thanks, how common are 30 year fixed mortgages? In NZ, I've never seen a bank offer a fixed rate for any longer than 5 years, and 5 years tends to be 1.5 - 2% above a 6/12 month fixed rate term.
For the most part in the United States when people talk about mortgages and mortgage rate, they’re talking about the 30yr fixed rate mortgage. The United States government does a lot to prop up home ownership buy purchasing a lot of these loans so banks don’t keep them on the balance sheet. This is primarily done through Fannie Mae and Freddie Mac - both of which are government sponsored publicly traded organizations. They each have trillions of dollars of dollars under management ($4.23 and $3.03 trillion respectively).
In 2008 these companies were “too big to fail”, which I think might’ve contributed to some sort of a short term economic hiccup. /s
These mortgages are good for people who believe they will sell their home within the time interval or, occasionally, the person who believes they will be able to refinance their mortgage.
However, as prior to 2022, mortgage rates were super low and an ARM offered little advantage against a market where you could get a 2.25% 30yr fixed, the became slightly less common the last few years.