interest rate risk. the 30 - year mortgage has been a feature in the united states for a long time, though, so banks have had plenty of time to adapt their risk management and the vast majority do a good job. one way us lenders manage risks is by securitizing most of their mortgage loans. as a result, unlike canadian banks, us banks don't hold most of the mortgages they write on their balance sheet. this is a feature of the us market that is generally thought to have contributed to the mortgage meltdown in 2008. since us lenders didn't retain the mortgages they wrote, they had less incentive to maintain good underwriting standards. government - backed mortgage insurance is also a feature in the united states. while it's not required on high - ratio mortgages the way it is here, many lenders make it a condition of approval. caps on loan amounts for insurance eligibility exist in the united states but are set according to local market conditions. us borrowers also pay higher interest rates on their mortgages. canadian fixed - rate mortgages are generally benchmarked off 5 - year government bond yields, whereas the us benchmark is the 10 - year treasury. prepayment penalties are more restrictive in the united states, but other flexibilities are also limited. us mortgages aren't portable, for example. so if you have a low mortgage rate but you get offered a job in another city with a big raise, you may have to give up your mortgage rate to get that raise. at the other end of the spectrum, in countries like australia and norway, most mortgages have a variable interest rate. this leaves all the interest rate risk with the borrower. amortization periods in most countries range between 20 and 40 years, although a fewprimarily in europe - have 50 - and 60 - year mortgages and some countries even feature 100 - year mortgages, designed to be intergenerational. interest - only mortgages are relatively common, especially in countries where interest is tax - deductible, such as denmark, norway and the netherlands. and finally, flexibility options have become increasingly common in most countries in recent years. here, i'm referring to options like skipping or adding a payment or features like a home equity credit line, which lets borrowers draw against their equity on 5 / 8 bis - central bankers'speeches demand. the exception is the united states, where mortgage

many mortgages are securitizedbundled together and sold to investors - widespread losses in the mortgage market could also have implications for market liquidity and overall financial stability. further, since mortgage insurance in canada is backed by the federal government, large losses could have fiscal implications. 1 / 8 bis - central bankers'speeches that's a lot of doom and gloom, so let me be clear that these are tail risks - they're not our forecast. from a monetary policy perspective, our forecast includes the expectation that households will continue to adjust their saving and spending patterns to absorb the impact of higher mortgage payments. and as interest rates come down that impact will fade, and consumption will gradually pick up. from a financial stability perspective, canadians have a long history of paying their mortgages. even through the 2008 – 09 global financial crisis, canada never saw a mortgage arrears rate above 0. 5 %. more recently, our mortgage market has fared well through a period of economic turbulence and a sharp rise in interest rates. arrears rates have risen but remain near historically low levels. given our recent experience, it's a good time to reflect. and even if the economy is getting back to something approaching normal, we're still expecting a future with more economic volatility and generally higher interest rates than we saw over much of the past two decades. another reason it's a good time to reflect is that mortgage finance rules are one of the levers policy - makers sometimes use to deal with housing affordability. house prices are primarily a function of the balance between supply and demand. but since most people borrow to buy a house, prices are also affected by the cost and availability of housing credit. the cost and availability of housing credit are, of course, influenced by central bank policy rates. they're also influenced by government policy and regulations. so this is what i'm going to talk about today. i'll start with a few key concepts to make sure we're all on the same page. then i'll offer a brief history lesson covering some important policy changes in canada's mortgage market. finally, i will draw out a few comparisons of mortgage finance in jurisdictions that do things differently than we do. the objective is to see what we can learn and where there might be opportunities for change. mortgages 101 home ownership is widely considered to be good for society, so governments in most countries like to provide incentives for it by ensuring that housing