Mortgage types around the world
The same monthly payment can hide very different rate risk. A 30-year fixed in the US protects you from rate hikes for life. A UK 2-year fixed exposes you every two years. Here's the regime in each major market.
Mortgage regime by country
| Country | Typical fix | Rate-risk lock-in |
|---|---|---|
| 🇺🇸United States 30-year fixed is the standard. Borrowers locked in pre-2022 at 3% have a structural advantage. | 30 yr fixed | Strong (no break fee) |
| 🇩🇰Denmark Unique market: borrowers can refinance both up and down with the bond market. | 30 yr fixed (covered bond) | Symmetric (refinance both ways) |
| 🇫🇷France Conservative lending culture; debt-to-income capped at 35%. | 20-25 yr fixed | Strong |
| 🇬🇧United Kingdom Borrowers face full rate risk every 2-5 years. The 2022-23 rate shock hit UK households fast. | 2-5 yr fixed | Weak (resets every 2-5 yr) |
| 🇳🇱Netherlands Mortgage interest deductibility (being phased down) historically distorted demand. | 10-30 yr fixed | Strong |
| 🇩🇪Germany Bausparvertrag savings-then-loan products are a parallel system. | 10-15 yr fixed | Strong, then resets |
| 🇪🇺Spain / Italy / Portugal Variable-rate borrowers carry the rate risk directly. | Variable (Euribor-linked) | Weak |
| 🇦🇺Australia Most household debt is variable-rate. Cash rate transmits to mortgage rates within months. | 1-3 yr fixed; mostly variable | Weak |
| 🇨🇦Canada Borrowers re-qualify at renewal; rate shocks transmit on a ~5-year lag. | 5 yr fixed (renewable) | Medium |
| 🇯🇵Japan BoJ rate normalization in 2024-25 means variable holders face new rate risk. | Mostly variable | Weak |
What the regime means for affordability
- Long-fixed markets (US, France, NL, Denmark): rate shocks transmit slowly. Affordability snapshots taken at one rate can persist for decades.
- Short-fixed markets(UK, Canada): borrowers re-qualify every few years. Today's affordability says little about what you'll qualify for at renewal.
- Variable-dominant markets (AU, JP, southern EU): rate hikes hit monthly bills directly. Buyers face higher real risk than the snapshot suggests.
- The howaffordable.org calculator uses a 30-year amortization at the country's current average rate. That's a reasonable headline but does not capture renewal/reset risk in short-fix markets.
Sources
- IMF Global Financial Stability Report (April 2024) — chapter on housing markets across regimes.
- BIS Working Paper No 864 — house price expectations
- National central bank publications used for typical fixed durations.