Proposed 50-Year Mortgages: A Potential Solution to Housing Affordability?
A recent proposal suggests extending mortgage terms to 50 years as a potential way to address the growing challenges of housing affordability, especially for younger generations. NPR’s recent coverage explored the implications of such a move, speaking with Susan Wachter, a professor of real estate and finance at the Wharton School of Business.
The discussion highlighted a concerning trend: a generation reaching home-buying age is increasingly unable to enter the market, facing rising rents and a lack of affordable options. this situation is impacting hope, the basic belief in the possibility of homeownership and escaping the instability of renting.
Wachter pointed out that the average age of a first-time homebuyer is now an all-time high of 40,according to the National Association of Realtors. A 50-year mortgage for such a buyer would mean making payments until age 90. “I don’t know. I can’t even plan for next week,” remarked NPR’s A Martínez, questioning the feasibility of such a long-term financial commitment.
While acknowledging that a 50-year mortgage isn’t a complete solution, Wachter suggested it could offer temporary relief thru lowered monthly payments and reduced down payment requirements, particularly with targeted subsidies.Some localities are already subsidizing both homeownership and renting to attract and retain workers.
The conversation also touched on the potential for refinancing with such a long-term mortgage, similar to how homeowners currently use refinancing to manage other financial obligations. However, Wachter emphasized that the core issue remains a lack of supply. “Ultimately, this is a supply problem. We don’t have those starter homes,” she stated.
Currently, a 50-year mortgage is not legally permissible. The Federal Housing Finance Agency (FHFA), which oversees Fannie and freddie, currently precludes such a product.
Wachter believes increasing housing supply is the most direct path to improving affordability. “I do think that there’s more attention to this issue, and I do think there’s room for more supply. We used to be a nation that did supply housing,” she said. She also acknowledged the role of mortgage markets and interest rates in the overall problem and the need for a comprehensive approach. However, she cautioned that this instrument likely won’t restore the homeownership options available to previous generations for millennials, Generation Z, and those that follow.
