WASHINGTON (TND) — The current rate for a 30-year fixed-rate mortgage is just over 7%, according to Freddie Mac, down from a peak of 8% in October but far above the 3% range we saw in 2020.
30-year fixed-rate mortgages are the most common mortgage option. In fact, 90% of American homeowners choose a 30-year fixed-rate mortgage because of their low monthly payments, flexibility with payments and locked in rates for 30 years.
The U.S. is the only country in the world where the 30-year fixed-rate mortgage is the most popular way to buy a house, thanks to government policy.
Congress officially authorized the 30-year mortgage in 1948 for new construction and 1954 for existing homes.
The government-sponsored agencies Fannie Mae and Freddie Mac buy mortgages from lenders – about 70% of them – giving lenders more capital to make more loans and ensuring they continue offering loans at little risk to themselves.
Indeed, the 30-year fixed-rate is unique to the U.S. because it combines the attributes of a long-term mortgage and a fixed-rate loan, when it is typically one or the other.
Canada offers both variable and fixed-rate mortgages, but there are no 30-year fixed-rate mortgages. Instead, they offer a fixed-rate 5-year mortgage that is paid off over 25 years, but gets refinanced every five years or so.
In the U.K., the most common are 2 or 5-year fixed rate mortgages that will then move on to the lender’s standard variable rate at the end of the fixed time period. Since those are typically more expensive, homeowners often refinance their properties.
Only a few other countries in the world offer the same type of government assistance that is offered here in the U.S., specifically mortgage securitization.
Canada and the Netherlands have government mortgage insurers like the Federal Housing Administration (FHA) here in the U.S., called the Canada Mortgage and Housing Corporation (CMHC) and the Dutch National Mortgage Guarantee (NHG). Canada and Japan offer specific government security guarantee programs like Ginnie Mae, called the Canada Mortgage Housing Corporation (CMHC) and the Japan Housing Finance Agency (JHF). Japan and Korea offer assistance through government-sponsored mortgage enterprises like Fannie Mae and Freddie Mac, called the Japan Housing Finance Agency (JHF) and the Korean Housing Finance Corporation. .
Other countries do provide some type of government support, just not the same kind. Instead, they rely on banks and other deposit-taking institutions.
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