[seibelj]

The only reason you want this is because tax payers subsidize your mortgage (assuming standard fixed-rate US mortgage). No other country offers this, and it’s clearly a handout to the upper middle class. In a free market your mortgage rate would rise with inflation, or to get a fixed rate (for 30 years!) you would have to agree to a rate far above current inflation.

[kpommerenke]

Taxpayers do not subsidize most mortgages in the US (with the exception of Ginnie Mae programs). Having a guarantee against default and fixed interest rates are two different things.

Government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac guarantee conforming mortgages that they securitize against default. They might ultimately be backed by the US Treasury and thus US taxpayers (if not in theory, then in practice).

However, when inflation is high, the burden on the borrower of paying off their fixed-rate mortgage goes down (as their income increases faster over time). Therefore, the borrowers are less likely to default during high inflation. Thus, having the GSEs guarantee these mortgages is not a subsidy that protects middle class borrowers from inflation. High inflation essentially eliminates the need for the guarantee by itself.

[cwalv]

The home ownership rate in the US is > 65%; it seems unlikely that this correlates well with "upper middle class", by any reasonable definition. A more interesting metric would be the percentage of people that benefit from the deduction and gov guarantees at some point in their life; I'd bet it's > 90%.

[cjbgkagh]

You have to re-weight by the value of the housing.

[seibelj]

It has to do with the absolute size of the mortgage. Fixed rates go as high as $770k borrowed. You have to be well-off to carry a $770k mortgage, and the value of this subsidy to that type of borrower is unneeded.

[nostrademons]

There's no cap to the amount of cash borrowed on a fixed-rate mortgage. Bay Area jumbo loans regularly top $2.5M, and during the 2020-2021 period, they had sub-3% fixed interest rates. The big difference between jumbo & conforming loans is that jumbo loans cannot be packaged off and securitized by Fannie & Freddie, and so they are largely kept on the originating financial institution's books.

The reason fixed mortgage rates have been below inflation recently is because the financial industry (bond buyers and mortgage underwriters, at least) have largely bought the Fed's "transitory" narrative. A 3% mortgage remains profitable if inflation runs at 8% for a year and then returns to 2%; it becomes very unprofitable if inflation stays at 8%. The reason mortgage rates have climbed so much in the last couple months is because the "transitory" narrative has basically collapsed, and the bond markets are now starting to price an extended period of high inflation into the rates they charge.

[seibelj]

It’s not that the interest is higher now! It’s that it’s fixed for 30 years no matter what the interest rate environment is! Plus it can be paid off early and refinanced when it suits the borrower!

I don’t know how more clearly I can state why this is a glaring subsidy for the rich. I’m sure in a free market these would just appear by themselves /s

[nostrademons]

My point is that fixed-rate jumbo loans are not a taxpayer subsidy, they're a banking subsidy. The bank is left holding the bag for existing jumbo loans when interest rates move against them.

There is some historical validity to the point that fixed-rate mortgages existed because of taxpayer subsidies. The creation of the FHA during the New Deal, and Fannie-Mae shortly after that, basically jumpstarted the practice. But there's a difference between jumpstarting the a market and continued subsidy of it. The existence of jumbo loans is an indication that even without taxpayer subsidies, fixed-rate mortgages still exist, presumably because the expectation of price stability means that private institutions don't think that the risk of interest rate variability is that great (jumbo mortgage borrowers usually pay about 0.5% more, so that's the implied risk premium). This can change during times of high price variability - my parents mortgage was 13.5% back in 1978, because expected inflation was about that. But that also indicates that interest rate risk is primarily absorbed by the private markets, and taxpayer subsidies play a relatively small part in it.

[kpommerenke]

A mortgage with a fixed interest rate and no prepayment penalty is no subsidized since the borrower pays for the option to prepay the mortgage with a higher interest rates than they would be able to get if they were not able to prepay the loan. The market prices in the value of the call option.

[seibelj]

Yes I'm sure all of these mortgages would be identically offered with such generous terms without the government being involved every step of the way

[cwalv]

I believe it's possible to get a fixed rate "jumbo" loan for even more than that, but since they're "non-conforming" they can't be sold to fanny/freddy, and so the banks take on the full risk of these loans. For conforming loans, the limit in most areas is $647k [1], which has risen substantially in recent years (along with broader housing cost inflation). Not adjusting for HCOL areas would effectively be blocking lower income people from moving into these (arguably) "higher-mobility" areas.

[1] https://www.fhfa.gov/mobile/Pages/public-affairs-detail.aspx...

[sofixa]

> (assuming standard fixed-rate US mortgage). No other country offers this

Fixed rate mortgages are the norm in multiple EU countries (i have one in France and it's pretty much the only option).

[xani_]

here in Poland you can freeze the rate for 5 years and that's it ;/

[checkyoursudo]

> tax payers subsidize your mortgage

How do taxpayers subsidize fixed-rate mortgages in the US?

[seibelj]

The government guarantees them. Banks would never offer this product otherwise.

[cortesoft]

The government does not guarantee mortgages.

[chordalkeyboard]

it is more complicated than the gp makes it seem, but 30 year mortgages are absolutely a creation of policy in the form of federally owned corporations that rebuy mortgages that were written according to a standard policy.

https://www.grarate.com/article/history-30-year-mortgage