It would be terrifying for any bank to give people 30 thirty year loans at historically low interest rates (because of the interest rate risk - rates have nowhere to go but up, and the bank could easily be upside down for most of the loan), so the U.S. government subsidizes/backs most mortgages (fannie and freddie). This tends to increase the cost of housing while taxpayers are taking on the interest rate risk instead of the banks.

The U.S. is an anomaly with these loans. Most countries don't do this 30 year fixed low rate mortgages like the U.S. It simply doesn't make sense for lenders to underwrite long loans at low rates.

Agreed, but technically, the loan is written at time of interest, and for that period it can provide a certain kind of stability in housing prices as well.

As 2008 taught us, other ways can come up to try and make money.

> That sounds terrifying. Do people just pay them off within quickly if interest rates rise?

Variable rate mortgages were a better bet 88% of the time between 1950 and 2000:

* https://wowa.ca/static/fixed-vs-variable-study.pdf

Post-2000 variable did fairly well as well.

It's the recency bias of the last 1-2 years that have people really freaking out about it.

A lot of mortgages here in South Africa do this every three months. We have ce tral bank interest rates which are relatively stable (except recently), and mortgages are given out as a function of that rate (e.g. rate + 2.4%). After the central bank rate changes, at the next three month period they use the new rate to adjust your mortgage payments.

Paying off mortgages quickly is often a topic, how much faster it happens compared to the US is another thing.

Typically, you decide on how you are going to approach the interest rate, and for how long. Owners can lock in for a fixed interest rate, or a variable rate that changes with prime. Term is most often 5 years, but latesly shorter or more flexible mortgages are more popular, sometimes between 2-4 years, and some folks who might take a risk on a 5+ year mortgage rate.

The variable rate mortgages out performed fixed rate mortgages for nearly 15-20 years. The tables turned in the past year or two.

you're usually fixed to a specific payment during that 5 year term. you can't pay it faster without paying a penalty. the bank expects their profit of X and by God they're going to get it.

during the re-up you can throw down extra money, but that's because it's an open contract, essentially.