Because government policies subsidize the 30-year, low-down-payment, non-recourse, no-prepayment-penalty mortgage, its embedded options are mispriced; if the subsidy were removed, the interest rate on such mortgages would be high relative to a Canadian-style 5-year recourse rollover mortgage, and the market would greatly reduce or eliminate the 30-year fixed-rate mortgage.

causalpending

Speaker

Arnold Kling

Evidence Quote

so my argument is if you took if you sort of took away pulled the government subsidy rug out of the 30 year low downpayment non-recourse mortgage if you pulled that rug out the interest rate on that mortgage would be high relative to something like a Canadian 5-year mortgage

Source

Arnold Kling on the Unseen World of Banking, Mortgages, and Government 07/5/2010EconTalk
Created: 6/13/2026, 7:04:06 PM

My Notes

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