Australians can only imagine what it is like to take out a home loan at interest rates that have been fixed for decades.
In the United States, Fannie, 87, and Freddie, 55, have turned this fantasy into reality for millions of people.
Who are these aging American dream-makers?
Fannie Mae, the unofficial name of the Federal National Mortgage Association, and Freddie Mac (Federal Home Loan Mortgage Corporation) buy home mortgages from banks and other lenders, allowing them to offer fixed-rate loans for 30 years or longer.
Although these publicly-traded enterprises created in 1939 and 1970 have been under government conservatorship since 2008 when they almost collapsed during the global financial crisis (GFC), they continue to operate.
Super holds the key
But hope may not be lost for Australians who want to lock in their mortgage rate for the long term, according to the man who runs one of the world’s largest investment managers.
Some of the A$4.2 trillion (US$2.6 trillion) in Australia’s superannuation accounts could be tapped to allow banks and other lenders to offer such loan products, said BlackRock Chief Executive Larry Frank.
“We believe Australia should be building a 30-year fixed rate mortgage market,” Fink was quoted by the Australian Financial Review newspaper as saying in an interview.
“Australia has a perfect opportunity right now, with all the long-term savings in the superannuation system.
“What would be better than to create a 30-year mortgage market here that gives more confidence to the Australian consumer?
“Because when they own a home, they know for the life of that ownership that at the time they’re in that home, their payments are fixed.
“There’s a lot of pressure on the (super funds) to invest more back in Australia. What better way can they invest than by building out a mortgage market?”
The man who oversees the investment of US$10+ trillion (A$16.1 trillion) around the globe did not explain how this would work and BlackRock declined to elaborate.
Buying bank bonds
But the Association of Superannuation Funds of Australia (ASFA) said that if banks issued bonds backed by long-term fixed-rate mortgages, super funds could consider investing in them.
However, the returns would have to exceed those of Australian Government bonds of similar maturity and compensate for risks such as the long duration, credit and relative illiquidity, ASFA CEO Mary Delahunty said.
“A fund that already operates direct bond investments could invest via direct purchases of these long-dated mortgage-backed bonds issued by banks. Alternatively, funds could provide liquidity via investments into a product offered by a fund manager which performs this investment strategy,” Delahunty told Azzet.
“Each fund would need to carefully assess whether such an investment aligns with its overall strategy and serves the best interests of its members.
“For example, funds would consider whether the returns offered by the long-term assets are appropriate to compensate for the risks, and are also consistent with the overall investment strategy of the total portfolio.”
University of NSW Economics Professor Richard Holden said longer fixed-rate loans would insulate Australian borrowers from big swings in interest rates.
“There is no reason why Australian lenders couldn’t offer 30-year fixed-rate mortgages,” Holden wrote in an article.
He said Australia had an active government bond market with maturities from one to 30 years which provided a benchmark against which to price mortgages.
One analyst said banks would need deep and liquid 30 year Treasury bond and swap markets to hedge their interest exposure if they were to lend for the same term at unchanged rates.
“It’s expensive to get a 30 year swap,” he said.
A taste for variety
He noted Australians had a strong appetite for variable rate home loans which accounted for at least 90% of the mortgages of the Big Four banks, Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corporation (ASX: WBC), National Australia Bank (ASX: NAB) and ANZ Group Holdings (ASX: ANZ).
Reserve Bank of Australia (RBA) Assistant Governor (Financial Markets) Christopher Kent said in 2024 that fixed rate mortgages had averaged a 20% share of Australian mortgages over the last 20 years with most being fixed for two years or less.
He said most private sector debt was subject to variable interest rates and fixed-rate debt tended to be fixed for short periods compared with other economies.
“At the other extreme, most mortgage debt in the United States is fixed for 30-year terms and large corporations issue a lot of fixed-rate bonds,” Kent said in a speech.
An exception was during the COVID-19 pandemic when, according to a Reserve Bank of Australia (RBA) article, the share of mortgages with fixed interest rates doubled to almost 40% in early 2022 as the pricing of fixed loans became more favourable.
The RBA said Australia had a higher share of mortgages with variable rates than many comparable advanced economies, and its fixed rate mortgages generally had shorter periods, averaging about two years compared with five years in the United Kingdom and Canada and 30 years in the United States.
The central bank noted that fixed rate borrowers in the U.S. were likely to have repaid their debt or refinanced it on more favourable terms within the 30-year period.
Long-term fix
Among the longest fixed rate home loans from Australian banks are 10 years loans from ANZ, which charged 7.24% if the loan to value ratio (LVR) was 80% or less and 7.69% if the LVR was more than 80%, according to its website on 31 March 2025.
This compares with 6.99% on a variable rate loan with a LVR of 80% or less and 7.19% with a LVR of more than 80%.
Rachel Wastell, a spokesperson for financial comparison service Mozo, said banks would have to offer competitive rates on long-term fixed rate mortgages if they wanted to attract Australians accustomed to shopping around and switching to better deals.
"Until lenders can offer competitive long-term fixed mortgages, most will likely keep playing the field - especially when the current price tag for the longest term fixed rates on offer from lenders feels more like a punishment than protection," Wastell told Azzet.
Although banking regulators declined to comment, it is clear that from a regulatory point of view nothing is stopping Australian banks and other lenders from offering 30-year fixed-rate mortgages.
The big questions are whether they ever will, with or without the support of super funds, and if they do, if borrowers will take them up.
Only time will tell.
