Trump Management Explores 50-Year Mortgages too Ease Housing Costs
Washington D.C. – The Trump administration considered a plan to introduce 50-year mortgages, aiming to lower monthly housing payments for prospective homebuyers, according to reports surfacing this week. While the proposal didn’t come to fruition during his presidency, renewed discussion around housing affordability is bringing the idea back into focus as current mortgage rates remain elevated and home prices stay stubbornly high.
The potential for significantly longer mortgage terms-extending well beyond the customary 30 years-could offer some relief to buyers struggling with affordability, but experts caution that the benefits might potentially be offset by higher interest rates and the risk of exacerbating already inflated home prices.The plan, if implemented, would impact millions of Americans seeking to enter the housing market and could reshape the landscape of homeownership for generations.
The idea behind the 50-year mortgage is simple: spreading payments over a longer period reduces the monthly amount due. However,lenders typically charge higher interest rates on longer-term loans to compensate for the increased risk of default. Currently, the average 30-year mortgage rate hovers around 6.25%, while 15-year mortgages carry a rate of approximately 5.6%, according to Bankrate.A 50-year loan would likely see an even higher interest rate.
“Lenders view longer time frames as carrying higher risks of default,” explained NerdWallet’s mortgage expert, Holden Wood. Conversely,shorter loan terms,like the 15-year mortgage,are considered less risky and therefore qualify for lower rates. Most homebuyers currently opt for 30-year loans to balance affordability with manageable monthly payments.
While extending loan terms could potentially boost buyer demand, some analysts worry this could inadvertently drive up home prices further, notably if housing supply doesn’t increase. “This is not the best way to solve housing affordability,” stated Redfin’s chief economist, Berner. “Extending loan terms could lift buyer demand, but that might push home prices even higher unless more housing is built, erasing any benefit from lower monthly payments.”
Home prices,though slightly down from their peak,averaged $410,800 in the second quarter of 2023,approximately 25% higher than in early 2020,according to data from the Federal Reserve Bank of St. Louis. Despite a slight easing this year, mortgage rates remain above 6%, more than double the pandemic-era lows. The debate over long-term mortgages highlights the ongoing challenge of making homeownership accessible in a market characterized by high costs and limited inventory.
