You're literally responding to a person in France with a fixed rate home loan (not mortgage, the housing isn't direct collateral for the loan). 30y is a bit on the long side, "traditional" is 20-25 years though.
In most cases it isn't a literal subsidy. Fannie Mae acts as a government-sponsored market maker to purchase home mortgages from lenders, then package and sell them to investors. By providing an "artificial" source of liquidity and taking on significant balance sheet risk they keep mortgage interest rates much lower than they would be in a free market system.
Mortgages are subsidized by the federal government. Housing supply is limited by state and local governments. Those are separate entities which often work in conflict with each other.
Doesn't matter who is limiting the supply though? Subsidizing something with artifically limited supply will automatically raise the prices and hurt ppl who they are intending to help. What am i missing here?
> Cheap 30y fixed rate home loans are an American thing. The federal government subsidizes them.
This statement sounded like 3oy fixed rate is possible only because of fed govt. meaning if its wasn't for fed govt subsidies 30yr fixed rate wouldn't have been possible.
FHA alone accounts for something like 1/5-1/4 of all home mortgages, varying slightly over time; and, its entire purpose was to shift the whole market (which it did).
A good number of French people somehow still remember (or talk with awe or anger about) the crazy early 80s, with the rampant inflation, the variable interest rates frenzy, combined with successive devaluations of the Franc Français and the moment the French government decided to follow the example of the Deutschmark and aim for what became the Euro...
Yeah when I asked (in France) about variable rates to a credit guy recently he looked at me like I was an alien. They probably still exist, but the loan-happy people won't even try to sell them, to me at least.
In a thirty years fixed mortgage, each payment includes a portion to paying down the principal and paying interest on the remaining principal.
In the beginning of the mortgage, the principal is higher, thus the interest portion is higher. In the first five years of a thirty year mortgage, a very small percentage goes towards the principal.
Assuming a thirty year fixed rate mortgage and a 7.5% interest rate, less than 15% of the mortgage payments in the first five years go to paying down the principal [1].
In recent decades Swiss and Nordic societies have dealt with rising home values with 50 year mortgages and interest only products that are barely recognizable to US home buyers.
Many Swiss have fairly dangerous interest rate exposure (to the SNB) based on the assumption that it will continue selling francs to keep exchange rates more competitive, etc.
The average duration of a 30 year mortgage being 11 years is due to refinancing or moving, it’s not due to large amounts of borrowers paying their debts early.
I'm french, and everyone I know has a fixed interest rate. dont know if it is mandatory, but God, I am so glad that my interest rate will never spike.