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Who knew US mortgages were so different to those in the UK?

This article from Business Insider discusses US mortgages and how they are typically fixed for 30 years (!?). This is great in some cases, but it also causes a 'lock in' effect when rates rise, causing all sorts of allocation issues. A similar system operates in the Netherlands, but they have come up a slightly complicated bond mechanism to reduce this lock in effect.

For Year 12, this is a good way of showing the differences in how interest rates feed through in different countries. It allows students to work through the effects of interest rate rises.

For Year 13, once students have studied financial markets, they should also be able to follow what is written about bonds.

You don't need to pay to read the article, but you do need to register abd glog in, so you might want to paste it into a word doc for your students (or use my favourite plugin, PrintFriendlyPDF) rather than sharing the link.


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