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Mortgage Variety Around The World

International-MortgagesShort-term or long term. Fixed or variable. The type of rate that’s popular in a country doesn’t necessarily affect its home ownership rate.

That’s one of the takeaways from The Research Institute for Housing America’s (RIHA’s) International Comparison of Mortgage Offerings report.

The 12 developed countries profiled in the study all have very different mortgage compositions. Yet, each of them also has a high home ownership rate.

Canada, for instance, is dominated by medium-term fixed mortgages (especially the 5-year fixed).

The U.S. is all about long-term fixed rates (like 15- and 30-year fixed rates).

Some countries, like the UK, have almost all short-term or variable rates.








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RIHA says the “dominant mortgage product in a country can change over time.” These changes are prompted mostly by interest rate trends, the economy, securitization, or government rule-making.

For example:

  • In the U.S.:  Hybrid adjustable rate mortgages (with low fixed payments for a few years, shifting to market-based variable-rate payments) were popular. Then the subprime crisis hit. Now, long-term fixed rates have regained dominance.
  • In Spain:  Spaniards shifted from fixed to variable mortgages after the government restricted the ability of lenders to charge pre-payment penalties in the mid-1990s.
  • In Denmark:  In 2005, 70% of Danish mortgages were medium-to-long-term fixed rates. By 2009, falling rates drove 80% of Danes into variable and short-term fixed rates.

Other interesting international mortgage policies:

  • German lenders sell interest rate risk insurance. They also offer forward rate contracts so borrowers can lock in rates up to three years in advance.
  • Japanese lenders allow fixed-payment variables that permit negative amortization (in Canada we prevent negative amortization with trigger rates).
  • U.S. mortgages typically don’t entail pre-payment penalties (but U.S. borrowers often pay “points” up front and notably higher closing costs than Canadians).
  • France and Spain have laws to limit pre-payment penalties.
  • German borrowers often must provide six months notice of repayment, but they typically aren’t charged pre-payment penalties if they sell their homes.
  • Amortizations in Finland go up to 60 years, while in Switzerland and Japan they reach 100 years (“inter-generational mortgages”).
  • 79% of the Netherlands’ mortgages are interest-only.
  • Payment holidays (skipped payments) are a popular feature in Australia and the U.K.

Gina Monaco and Robert McLister, CMT