Many in the industry continue to oppose the increasing amount of government direction, regulation, and interference in the housing market in the United States. To one degree or another, however, the U.S. government in this country has always had an interest in housing, with varying effects. The U.S. has a relatively high rate of homeownership but it is not the highest among major developed markets. In this comparison, Australia, Ireland, Span and the U.K. all have higher rates of homeownership and Canada’s rate is comparable to that of the U.S. And interestingly, these countries provide far less government support for homeownership than the U.S. Can we learn anything from looking at home ownership, and mortgage lending, in other countries?
Most western European countries have lower rates of homeownership in part due to strong social rental systems but southern European countries like Italy, Greece and Spain have higher rates of homeownership reflecting cultural values, discriminatory policies towards private rental housing and weaker support of social rental housing. During the early 2000’s the US had an unprecedented run-up of house prices, but values in other countries actually increased more. And then Australia and the U.S. were the first of the bubble countries in which house prices fell, the U.S. more than other countries, although the Australian housing market has since recovered.
Turning to mortgage rates, rates in most countries declined during the decade - except in Australia. (The Australian central bank increased interest rates in 2003 in part to head off a housing price bubble.) Australia is among a group of countries, which also includes Ireland, Spain, and the UK, where mortgages are predominately short-term variable rate markets. Their mortgage rates declined more sharply than those in other countries during the crisis.
More specifically, lenders mostly offer variable rate or short term (typically 1-3 year) fixed rate mortgages in Australia, Ireland, Spain and the UK. The designs of adjustable rate mortgages vary - in Australia and the UK the standard variable rate mortgage has a rate set by the lender at its discretion, and rates are changed for all borrowers at the same time. Spain and the US have indexed ARMs. In the UK, “tracker mortgages,” which are indexed ARMs, have become dominant, and initial fixed rate discounts are prevalent in Australia and the UK. But the magnitudes of the discounts are less than those in the US during the boom – typically around 100 basis points lasting 1-2 years
Here in the States, as we know, we have a high proportion of long term fixed rate mortgages. The ARM and short term fixed (hybrid) share in the US grew during the boom – accounting for about 1/3 of loans during the 2004-2006 period but our market has reverted to the fixed rate mortgage in recent years.
Heading back to Europe, long term fixed rate mortgages used to be the dominant product in Denmark but relatively low and falling short-term rates have led Danish borrowers to shift to medium term (1-5 year) fixed rate loans in recent years. (A high proportion of Dutch loans are interest only to maximize tax benefits.) Rollover mortgages are the dominant product in Germany and the Netherlands, as well as Canada. These loans have a fixed rate for up to 5 years (10 years in Germany) with a 25-30 year amortization period (briefly up to 40 years in Canada). At the end of the fixed rate period the rate adjusts to the new market rate. There is a substantial (as high as yield maintenance) prepayment penalty during the fixed rate period. Some Spanish loans are part fixed and part variable rate.
In the Orient, about one half of Japanese loans are convertible (after the end of the fixed rate term the borrower can select another fixed rate period or switch to a variable rate).6 Japanese floating rate loans have fixed payments for 5 years with potential deferral and negative amortization. Mortgage funding comparisons reveal interesting differences.
In contrast to securitization which is primarily a U.S. feature, deposit funding dominates in most countries. (Over 60% of US residential mortgages have been securitized – the next closest countries are Canada, Spain and the UK with 24% to 28% securitized.) Covered bonds are a more common funding mechanism in Europe – for example 94% of Danish funding and 47% of Spanish funding come from this source.
(A big thank-you is owed to Loren Picard, Senior Managing Director of LMA Capital, Inc., a firm focused on advising mortgage banking firms and mortgage investors in the creation and management of unique mortgage products in the non-agency market.)
35 Comments
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Mortgage rates are different in each country and it varies every year.
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Charlie Y
115
Hi Rob, I appreciate you for sharing data with the information. But mortgage rates keep on fluctuating So, we can't fix a point to discuss on.. Regards honeywell dolphin 6500
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Charlie Y
115
Hi Rob, I appreciate you for sharing data with the information. But mortgage rates keep on fluctuating So, we can't fix a point to discuss on.. Regards honeywell dolphin 6500
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Charlie Y
115
Hi Rob, I appreciate you for sharing data with the information. But mortgage rates keep on fluctuating So, we can't fix a point to discuss on.. Regards honeywell dolphin 6500
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Charlie Y
115
Hi Rob, I appreciate you for sharing data with the information. But mortgage rates keep on fluctuating So, we can't fix a point to discuss on.. Regards honeywell dolphin 6500
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Charlie Y
115
Hi Rob, I appreciate you for sharing data with the information. But mortgage rates keep on fluctuating So, we can't fix a point to discuss on.. Regards honeywell dolphin 6500
Reply
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Charlie Y
115
Hi Rob, I appreciate you for sharing data with the information. But mortgage rates keep on fluctuating So, we can't fix a point to discuss on.. Regards honeywell dolphin 6500
Reply
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Charlie Y
115
Hi Rob, I appreciate you for sharing data with the information. But mortgage rates keep on fluctuating So, we can't fix a point to discuss on.. Regards honeywell dolphin 6500
Reply
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Charlie Y
115
Hi Rob, I appreciate you for sharing data with the information. But mortgage rates keep on fluctuating So, we can't fix a point to discuss on.. Regards honeywell dolphin 6500
Reply
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Charlie Y
115
Hi Rob, I appreciate you for sharing data with the information. But mortgage rates keep on fluctuating So, we can't fix a point to discuss on.. Regards honeywell dolphin 6500
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Charlotte Mortgage
142
Traditional lending philosophy, in the US, held that 30 year amortized fixed rate mortgage loans made possible stable home ownership, for most citizens. It was widely believed that a fixed rate, fully amortized loan held down delinquency rates and allowed borrowers to more confidently spend discretionary income - with the confidence of knowing what their mortgage payment would be today, tomorrow and 15 years from now. Latin America is an example of a market without fixed rate, fully amortized, mortgage loans - and has existed, since the advent of mortgage lending, on short term ARM lending (1 to 3 years). This has made home ownership impossible for the majority of Latinos - and assisted in creating a myriad of societal issues (lack of a formal construction industry, lack of a middle class, lack of zoning, etc). Whatever happens over the next few years, it is imperative that the US continues to maintain a strong fixed rate, fully amortized, mortgage loan product. If the GSEs go the way of the Dodo, there must develop - quickly - a private industry alternative.
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Now a days it can be seen that there has been increase in the government interference in the open market because of which there has been fluctuations in the Mortgage rate of the interest. Regards, Cally Green
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Many countries have standard mortgage or conforming mortgages that define a perceived acceptable level of risk, which can be formal or informal and reinforced by laws. Government only allows to take standard mortgage in which one-third of gross income going to mortgage debt.
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Its is mostly seen that mortgage rates keep on fluctuating.Such fluctuation takes place due to increase and decrease in the economical activities of a nation.
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You have a point but the governament may have a different view on which it is acting.
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Can you please tell me certain reasons because of which there is the fixed mortgage rate in recent years.
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The benefit of Mortgage loans is that interest rates are tax deductible and are also made with flexible options with fixed rate or ARM's.
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As increasing numbers of wealthy baby boomers seek to retire and head overseas to enjoy sunnier climes there is a growing need for competitive overseas property mortgages providers
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I completely agree with you that there is increase in the government direction, regulation, and interference in the housing market. Such step is taken in order to control the flow of money in the open market.
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This is really very informative post regarding Mortgage Lending.This post is really very helpful for my Project.Thanks for sharing the data along with the informative post.
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The source of the threat to financial stability is more often in commercial property or property development than in home mortgages, so to keep the risks posed by the housing and home mortgage markets in perspective.
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fasdfa
234
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Just wanna add one point, "Lending standards has been eased in United States far beyond what was seen in other countries over the boom period."
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Yes you are right now a days government is interfering in the money market.Money supply is increasing in the market so in order to control this such steps are need to be taken by the government.
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I was searching for countries which have home ownership. And this one is good for discussing important points. But if I upgrade the townhouse with better appliances and flooring I could rent it for 50% more than my expenses.
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Adney Dachtler
240
I was searching for countries which have home ownership. And this one is good for discussing important points. But if I upgrade the townhouse with better appliances and flooring I could rent it for 50% more than my expenses. custom wristband
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Mortgages are priced for sale to attract investors who seek fixed income investments.
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Great service, advice and guidance on the remortgaging of our house .It might be helpful for the homeowners in mortgaging process.
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I was not aware of the certain facts which you have discussed above.All the information which you have provided regarding the mortgage rates,variable rates,etc will help me to make my project full of wrathful information.Thanks for sharing the information,i am bookmarking your for further reference.
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I consider you’ve created some genuinely exciting points. Not too most people would in reality consider about this the way you simply did.
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Most mortgage deals carry arrangement fees, which varies from a hundred pounds up to a couple of thousand. Fixed rate mortgages charge a fixed rate of interest for a certain period.
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I consider you’ve created some genuinely exciting points. Not too most people would in reality consider about this the way you simply did.
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I think that it is really nice to use another device for this and I am sure that you can't have any problem with this.
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Mike
1 121
Rob- can you comment on the gvt support in other countries concerning mortgage interest and property tax deductions?
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Rob
1 116
Will try to dig into it, although an analysis of the various tax laws around the world (published and otherwise) is quite an undertaking.
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