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Make Me Smart

The problem with the American 30-year mortgage

Jul 9, 2024
Professor Andra Ghent from the University of Utah discusses the origins of the 30-year fixed-rate mortgage and its impact on the housing market, including the lock-in effect. The podcast also delves into the FTC's scrutiny of pharmacy benefit managers and shares a travel lesson learned. Could the Danish mortgage model be a solution for the US?
29:32

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

  • The 30-year fixed-rate mortgage in the US creates a lock-in effect for homeowners with low rates.
  • Efforts to improve the housing market include easing building regulations and regulating pharmacy benefit managers.

Deep dives

Origins of the 30-year fixed mortgage in the US

The 30-year fixed mortgage, a common practice in the US, has roots dating back to the Great Depression. The residential mortgage system began with fully amortizing loans offered by building and loans, which later evolved with the creation of institutions like the FHA. These developments led to the standardized use of fixed-rate mortgages.

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