There are fixed rate mortgages in the UK, which have been around since the 1300’s, and US mortgage law is based on UK common law. ARM’s are no doubt a prominant feature in the UK mortgage landscape now, as real estate prices are silly-stupid.
In the 1990’s endowment mortgages were the buzz word whereby payments were apportioned to equity that was predicted to pay off the lump sum at the end of the term. Lenders soon found themselves in court for “misselling”, fending off disgruntled borrowers whose endowments were falling well short. Poor regulation was blamed then as it is now. Many got their fingers burnt both sides of the fence.
Rates in the UK and parts of Europe are as low as 3.5% to 4%. Bear in mind disposable income is lower than the US but property prices are very high, London being the second most expensive city in the world. To add insult to injury, many properties in the inner London area are lease-hold, so even when you have paid off your mortgage you still don’t own your home. To give you an idea, a small one bedroom lease-hold apartment in a fairly nice area of central London will set you back US$900,000.
Second home ownership has spiralled, and with most of the obvious markets (Spain, Portugal, France etc) having been exploited, the up-and-coming and new members (Croatia, Bulgaria, Romania) of the EU present opportunities for investment. The effect on all these places is to put pressure on prices, often forcing the local populace out, which understandably leaves a bitter taste. However, it is often the locals who are selling at these high prices.
The French, Italians, and even Germans have traditionally been renters, but many have now realised the potential of real estate. French farmers laugh at how much the English are willing to pay for a run down stone barn. But then, when they see that is has been beautifully restored and flipped for a huge gain, the proverbial Ooh La La! is followed by thoughtful head scrathing.
I agree that tinkering with interest rates to stimulate the economy is not really a conspiracy, but short-termism seems to be a by-product of democratic economic planning.
