> However they are currently running at an interest rate of a little under 4% which is much higher than the rate offered on a typical 5 year year fix. This makes them unattractive when you can just perpetually keep re-mortgaging on 5 year fixes.

Renewing after 5 years will presumably get you whatever rate is then? Which might be much higher.

It's always better to get a fixed rate (for the life of the loan) mortgage. If rates go up, you're protected. If rates go down, you can refinance to cheaper rates.

Well it's an unknowable gamble. You might also be locking in an excessively high rate. The flexible approach of continuously re-mortgaging would have been the better strategy for the last 10 years with interest rates that went down. In the next 10 years, who knows.

> Well it's an unknowable gamble. You might also be locking in an excessively high rate. The flexible approach of continuously re-mortgaging would have been the better strategy for the last 10 years with interest rates that went down.

There is no gamble, that's why it is almost a free lunch. If rates keep going down as last ~10 years, you're never locked in, you keep refinancing to a lower and lower rate. If rates go up, you stay put with a fixed rate that can't ever go up. You win both ways.

I didn't correctly read your comment sorry. I don't know about the US system, but here the fixes normally do have a lock-in typically on a ratchet system where they are expensive to exit in the early part of the loan and cheaper later. For example one I just checked charges you 5% of the loan to exit any time in the first 5 years and then 3% to exit any time in the next 5 years. There is also a significant discrepancy in the interest rates charged for different term lengths e.g. the offer presented may be 3.7% for a lifetime fix or 2.4% for a 5 year. So you're paying 1.3% extra for the lifetime fix right out of the gate. So the gamble is will 5 year fixes cost more than 3.7% in 5 years time? If not, then you won on the 5 year fix.

I see, interesting! Agreed, on such a system it becomes more of a gamble to pick what might be best long term.

In the USA there is no penalty to pay off a loan and refinance (there might be exceptions but never seen one) so you can do it at any time as frequently as you like and keep ratcheting the rates down.

There's also not such a huge difference. Looking at zillow today, 30-year fixed shows 4.95% and a 7-year adjustable at 4.81%

30 year fixed mortgages in the US typically allow prepayment with no penalty other than some relatively nominal origination costs on the new loan, so you have a free option to lower by taking out a new mortgage when rates drop, while being protected on the other side. That combined with a few other features make them an extraordinarily good deal (especially when they have a strongly negative real rate, like now).