Trump Management โExplores 50-Year โคMortgages too Ease Housing Costs
Washington D.C. – โคTheโข Trump administration consideredโ a plan to โintroduce โ50-yearโ mortgages, aiming to lower monthly housing payments forโค prospective homebuyers,โ according โฃto reports surfacing this week.โ While theโค proposal didn’t โฃcome to fruition โduring his โpresidency, renewed discussion around housing affordability is bringing the idea backโค into focus as current mortgage โrates remain elevated and โhome pricesโข stay stubbornly high.
Theโข potential forโค significantly longer โmortgage terms-extending โขwell beyond the customary 30โ years-could offer some reliefโค to โคbuyers struggling with affordability, but experts cautionโ that โคthe benefits might โpotentiallyโ be offset by higher interest rates andโ the risk of exacerbating already inflated home prices.The plan, ifโ implemented, would impact millions of Americans seeking to enterโ the housingโข market and could reshape the landscape of homeownership for generations.
The idea behind the 50-year mortgage is simple: spreading payments โคoverโข a longer period reduces the monthly amount due. โHowever,lenders โtypically โcharge โhigher interest rates on longer-term loans to compensate for โthe increased risk of default. Currently, the average 30-year mortgage rate hovers around 6.25%, while 15-year mortgages carryโฃ a rate of approximately 5.6%, according to Bankrate.A 50-year loan would likely see an even higher โinterest rate.
“Lenders view longer time frames as โขcarrying higher โคrisks of default,” explained โNerdWallet’s mortgage expert, Holden Wood. Conversely,shorter โloan terms,like the 15-year mortgage,areโฃ considered less risky and therefore qualify โคforโ lower โขrates. Most homebuyers currently optโค for 30-year loans to balance โฃaffordability with manageable monthly payments.
While โextending loan terms could potentially boost buyer demand, some analysts worry this could โฃinadvertently drive up homeโ prices further, notably if housing supply doesn’t โincrease. “This is notโค the โขbest โway to solve housingโ affordability,” stated Redfin’s chief economist, Berner. “Extending loan terms could liftโ buyer demand, but that โขmight push โhome prices even higher unless more housing is built,โ erasing anyโ benefit โคfrom lower monthly payments.”
Home prices,though slightly down from theirโฃ peak,averaged $410,800 in the second quarter ofโข 2023,approximately 25% higher โthan in early 2020,according to dataโฃ fromโฃ the Federal Reserve โขBank of St. Louis. Despite a slightโค easing this year, mortgage rates remain above 6%, more than doubleโค theโข pandemic-era lows. The debateโ over long-termโค mortgages highlights โthe ongoing challenge of โขmaking homeownership accessible in a market โคcharacterized by high costs and limited inventory.