[abeppu]

As an American I was struck by the graph of mortgages by fixed term length. I guess I've always heard that US home buyers are constantly benefiting from policies propping up 30 year fixed mortgages, and I knew that other places this wasn't the norm. But it's surprising to me that a majority of mortgage debt in NZ is fixed for less than 1 year. Even in years that don't see rapid interest rate changes, this must make it very hard to plan.

[ztetranz]

That's true. As a kiwi in the US, I was surprised by how many mortgages here are fixed term for a long time. When I last bought a house in NZ about 30 years ago floating rate (potentially changing every month) was the norm and "lock in your rate for five years" was advertised as an option you could take.

My American father-in-law who is a retired realestate / financial industry professional seemed to have trouble getting his head around that when I told him. Not only that long term fixed rates were not available but also when you're in a short term (5 year) fixed rate, you can't easier refinance if the general rates go down. That seemed normal to me at the time because it's a gamble for both parties. If I sign a contract to pay X% for the next five years then it doesn't seem like I should be able to change my mind part way through any more than the bank can renege on the deal. That said, I never suffered significantly so that's easy for me to say.

Likewise for deposits. It seems a lot easier to break a CD early (forfeiting some interest) in the US than it is to break a term deposit (like a CD) in NZ.

[bombcar]

The US market is greatly formed by the Great Depression - before that both sides could "call" the mortgage at anytime, basically (you could pay it off anytime you wanted, and the bank could call you and say "pay us cash tomorrow"). But nobody ever really DID either of those except from normal business (moving, missing payments, foreclosure, etc).

And then the 1929 market crash wiped out the banks so they called in all their assets (loans).

And so now the US Government steps in and says "banks you can't do that" and the banks said "then screw lending" and the government said "we'll buy and resell the loans with our guarantee" and the banks said, "oh really hmmm".

You can get ARMs for real estate in the US, and they may become more attractive as rates rise; the rates were so low it wasn't really worth it to even consider, but they exist - here are some: https://www.bankofamerica.com/mortgage/adjustable-rate-mortg...

The average American holds their loan for something like 7-10 years before either moving/selling or refinancing, so an ARM can be a worthy consideration. But you must plan around what it could do "worst case".

[rr888]

The long term fixed term mortgage in the US rely on Govt regulation and the securitization of debt. In most countries when you get a mortgage its literally a loan from the bank, not sold on to bond holders.

Floating rate makes sense, if inflation rises, rates rise and usually so the pay rises so you can afford to pay more. In the US I have fixed at ~2% for 15 years which is good for me but seems silly over such a long term.