The 50-Year Mortgage: A Question of Systemic Issues, Not Just Loan Length
The idea of a 50-year mortgage has recently surfaced as a potential solution to housing affordability, but experts suggest the core problems lie deeper than simply extending loan terms. A recent NPR Planet Money report highlights that many of the issues associated with a 50-year mortgage already exist within the current 30-year system, and that increasing housing supply is the essential need.
One meaningful problem is refinancing. According to researcher Campbell, “a lot of people don’t know when to refinance and they just don’t do it.” This inaction disproportionately affects Black and Hispanic borrowers, who are demonstrably slower to refinance than white borrowers, leading to them paying higher interest rates.
Further complicating the market is “lock-in,” a phenomenon where homeowners with exceptionally low, fixed interest rates – a situation many current homeowners find themselves in – are hesitant to sell, even as interest rates rise. This reluctance is contributing to ”stubbornly high” home prices, contrasting with other countries where adjustable-rate mortgages are more common and housing prices have seen more significant dips in response to interest rate increases. Fairweather notes this creates an “unequal treatment between first time home buyers and existing homeowners,” benefiting those who have owned homes longer.Economists also believe this lock-in negatively impacts the broader economy, potentially preventing people from pursuing more productive job opportunities due to the disincentive to move and lose their low mortgage rate.
The motivation behind considering a 50-year mortgage is to increase homeownership access amidst high prices and rising interest rates. However, experts universally agree that this alone won’t solve the affordability crisis.the report stresses the critical need to increase housing supply.
Campbell argues that initiatives aimed at helping buyers, including both a 50-year mortgage and proposals like direct financial assistance to first-time homebuyers, primarily benefit sellers. With limited supply, increased demand simply drives up prices as buyers compete for the same properties.
Ultimately, while a 50-year mortgage coudl offer some benefits in a market with increased housing supply, its not a standalone solution. Duke economist Berger recommends government investment in financial literacy programs to help Americans better understand mortgages and explore option financial options, acknowledging the inherent complexity of these financial products.The core issue, however, remains the need to build more homes.
