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

##ening and that the inventory adjustment, particularly in the electrical and electronic sectors, was less advanced than expected. accordingly, we revised down our projections for the second half of 2001 and the first half of 2002. and, at the end of august, we lowered interest rates to support domestic demand growth and to keep inflation near the target of 2 per cent over the medium term. the terrorist acts in the united states, and their worldwide fallout, greatly heightened the degree of uncertainty, further dampening near - term growth prospects. to underpin confidence in the face of this uncertainty, we took the exceptional step of lowering interest rates by ½ of a percentage point on 17 september, outside our regular schedule of fixed announcement dates. the ongoing economic consequences of the terrorist acts are very difficult to assess. these developments are unlike anything we have ever experienced in north america, and it will take some more time to understand their full implications. if we consider the direct effects of the attacks, their immediate impact on consumer and business confidence, and adjustments to address increased security risks, the bank expects that output growth in canada will be close to zero or slightly negative in the second half of 2001. for all of 2001, this implies growth of about 1½ per cent. as we look to 2002, the timing and strength of a recovery will depend crucially on geopolitics and on how soon confidence returns to normal in north america. but once the uncertainty stemming from terrorist acts dissipates, i expect that healthy growth in output, investment, and employment will resume, given canada's sound economic fundamentals. at present, one can envisage two scenarios with respect to confidence. in the first, confidence could be restored quickly, and robust growth could resume, supported by the substantial monetary and fiscal stimulus already in place. in the second, confidence could stay weak for some time and, consequently, growth would remain sluggish through most of 2002. under either scenario, by the end of 2002, our economy would still be operating at levels that are below capacity. core inflation is thus expected to fall to about 1½ per cent by the second half of 2002. total cpi inflation is also expected to decline to about 2 per cent by the end of 2001 and to move below that during 2002, if energy prices remain at or below their early - september levels. based on these considerations, on 23 october, we again lowered our key policy interest rate by ¾ of a percentage point. the cumulative reduction of 3 full percentage