I’ve had mortgages in two countries, the UK and Australia. They work very similarly, you can generally get a ‘tracker’ mortgage, which is a little above the central bank rate and tracks the central bank rate, so your repayments vary over time, or you can get a fixed rate.
Fixed rates are usually more expensive, and the longer you fix (typically 1,2,3 or 5 years, though you do see 8) the more of a premium you pay over the tracker rate. When your fixed period expires you usually refinance based around whatever new rates are available at that point, and you are usually constrained from refinancing during that period (exit fees).
But in the US I understand that people usually fix the rate for the whole term of the loan? And I imagine that makes refinancing quite rare?
Is this not quite risky for banks? Not that banks taking a risk is bad, but it seems a very long bet for them.
What sort of interest rate premium over the base rate is common?
In the UK or here AFAICT it’s usually about 1.2-1.5% over base rate for the better value trackers and goes up from there for fixed, depending on your loan to value ratio as well. IIRC I had a five year fixed at about 2.5% over base in the UK, though memory is fuzzy.