The government is almost never the right provider of a commodity service. What possible benefit is derived from having the government manage the making of loans, already a competitive market?
Mind that the US is somewhat unique in its subsidy of early-prepay 30y fixed mortgages - they exist nowhere else, because no sensible private lender would offer such a product otherwise (or a huge markup).
Maybe that’s because Americans move around more and can’t be nailed to a house for 15-30 years like every european homeowner is (where you can neither refinance nor pay back early without paying essentially all future interest payments at once - US mortgage conditions are insanely good).
In AU the standard is a floating rate mortgage, with most fixed alternatives capping out at 5 years (which obviously has much more limited up and downside than a longer duration 30y equivalent). Those fixed loans can be more or less expensive than the variable rate, depending on market conditions.
I got a 20 year fixed at 1.125% and I am really happy the bank can’t get out of it. I really did wonder why they even gave me that money but who am I to complain.
Eh, I think that’s a slight exaggeration. In Ireland you can get a 3.8% 30 year fix which allowed overpayment of up to 10% of balance/year, and redemption penalties capped at 2% of balance. This is, in practice, cheaper than virtually any US mortgage today, unless you’re only planning to keep the mortgage a few months.
Granted, that’s kind a _weird_ product; I think only one lender provides it, and the market norm is definitely for fixes in the 5 year range (often with redemption penalties waived if you’re moving); after 5 years, you either transition to a variable, move lender, or re-fix. This seems to be more of a market norm/preference thing, though; Avant, the lender who does the 30 year one, appears to be able to make it work economically.
One oddity in the Irish market that maybe makes this easier is that mortgage lenders are only allowed charge, essentially, at most the cost to _them_ of breaking a fix as an early redemption fee. In practice, this is usually not all that high and may be zero. I’m not sure how many other countries have this rule.
Its hard to believe a 30y fixed bond wouldn't cost a ton of money to break, depending on the point you sell it.
Imagine a 30y yielding 3% with new loans yielding 6%. That bond would be priced at half its face value in order to make up for the yield difference - and in theory the debtor would have to pay that difference to buy it back.
The only way loans like that can be cheaper is an option/insurance (which costs money) in the loan to cover that risk.
Mind that the US is somewhat unique in its subsidy of early-prepay 30y fixed mortgages - they exist nowhere else, because no sensible private lender would offer such a product otherwise (or a huge markup).