Our approach sounds much more sane than the US. Who wants to fix at todays rate for 30 years with no ability to the port the terms to a new property?

Maybe I'm misunderstanding, but I don't really see the problem with the US system.

I can opt into a fixed 30 year mortgage, which I can exit at basically any point through a refinance or sale event.

I can't port my terms, but my rate is also fixed for up to 30 years unless I exit the arrangement. That's a safer deal for me than having 5 years of fixed interest and then being completely at the mercy of market rates.

At least for me - I'm fixed at 2.25% on a 20 year mortgage. Which was only possible because I exited a mortgage through a refinance to bring my rate from 4.4% to 2.25%. Right now if I refinanced, my rate would be much higher - so I will defer borrowing lots of money again.

Basically - The US system only feels weird when we experience particularly strong movement in interest rates. If the rate stabilizes at 7%, no one is going to bat an eye at getting a loan at 7%. It's only during this window where 18 months ago I could get 2.25% and now it's 7% that feels off. And even now - it's not off, there are just lots of folks in a position where their current mortgage is now a steal, and selling sucks since they lose the benefits.

There's no prepay penalty in the US. I got a fixed rate at 5% on my current house and currently pay 3% due to having taken out new loans to pay off the old one (a.k.a refinancing).

A 30 year rate fix with no prepay penalty is incredibly borrower friendly because you can (nearly) always take advantage of lower interest rates, but don't have to worry about your rate ever going up.

Is it illegal to have prepay penalty, or not done out of tradition?

I honestly don't know. The way many restrictions work in the US though is that legally is on a state-by-state basis, but the main driver is whether or not Fannie Mae (and similar federal entities) will underwrite the loan. That's where the 30 year maximum term, and 80% loan-to-value limits come from

American mortgages are also designed to pay out disproportionately more interest up front, and much of the cost of the loan is also paid directly at closing as up front fees.

Ex: closing costs for new mortgage in my area average around 5k.

Except that fixed term mortgages have the option to prepay - so people in the US signing 30yr fixed mortgages are locking in a fixed ceiling for the duration of their mortgage, and if mortgage rates come down in a couple of years, they just refinance the whole thing, but they pay a spread over an ARM for this option. For some people it’s more prudent to pay a few hundred extra basis points over the next several years, than risk their mortgage resetting at a higher rate, and having the option of refinancing at a lower rate…they’re purchasing insurance…

Nah, it's better in the US. 30 year fixed being the norm means that you don't need to worry about rate hikes. The advantage of shorter fixed rate periods are usually lower rates, but 30 years are already low. The peace of mind is valuable.

Those 30 year mortgages also makes the economy less sensitive to interest rate raises, allowing you to run a higher interest rate than a comparable country where 30-year mortgages is not the norm. This makes the dollar stronger.