Ask HN: Why do lenders offer long-term fixed rate mortgages in the US?

3 pointsTycho3 comments

In the UK you typically get fixed terms of 2 years or 5 years, and shop around for a new deal once that term expires. The norm in America seems to be 25 year fixed rate contracts. What is the systemic difference between the UK and US such that lenders are willing to accept this interest rate risk?

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Lenders can sell qualifying mortgages to the Federal agencies Fannie Mae and Freddie Mac to offload their interest rate risk. When a bank intends to sell the mortgages it grants, it may become careless about credit risk -- this lead to the 2008 financial crisis.

Fannie Mae was created in 1938 so there were other factors at play in the 2008 financial crisis. Mostly sub-prime mortgages. and lenders being able to "shop" for appraisals.

This makes sense. Obvious now that I think about it.

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