> because people buy the largest, longest mortgage they can afford, small changes in small interest rates result in large changes in the monthly payment. I feel like this ends up making the whole housing market more volatile.

In the US, I think 90% of home mortgage loans are fixed rate loans, so borrowers do not have changing monthly payments. I cannot find an easy source for it, but I think I read it from an Ellie Mae report.

And ARMs come in 5/7/10 year, but the longest mortgages are fixed rate at 15/20/25/30 years.