As the author says, it is because the mortgage is hardly for my benefit.
Its purpose is to grant some privileges to those who remain on the treadmill of work for a long time without falling off, and to act as something like a tax, levied on behalf of the absurdly wealthy + institutional investors.
In the US at least, govt has problems running "retail." (It also has problems running wholesale, as evidenced by the give-aways to BlackRock, but ...)
Mortgages themselves are unusually public in the US and probably staying that way. Other people don't get 30 year fixed loans, that's a huge benefit and inflation defense.
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).
- It is the norm to use either a variable rate or series of short fixed rates
OR
- Redemption fee is capped (for instance in France it’s capped at one quarter worth of interest).
I’m not sure it’s normal anywhere to have a 30 year fix which you can’t get out of? Which country are you thinking of?
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.
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.
In all financial instruments risk & return are intertwined and inversely correlated. If the mortgages could be provided at the base rate of interest that would imply they have zero risk. But mortgages do have some risk, although a very low one compared to e.g. buying stocks, so the rate is necessarily above the zero-risk rate.