Trump wants to extend the mortgage term to 50 years, industry professionals question its feasibility: interest costs double, lifetime repayment is not possible.

According to the content posted by Trump on the "True Social" platform, he proposed to launch a new 50-year mortgage plan to encourage young people to purchase properties. The US President put forward the idea of implementing a 50-year mortgage plan aimed at helping voters address one of their most concerning issues: housing affordability. Trump stated in an interview aired on Monday, "This just means that the amount you pay monthly will decrease." The Trump administration is committed to reducing the monthly housing costs for homebuyers, a move taken after a series of Democratic election victories last week. In these elections, candidates won support from voters by emphasizing the affordability of housing and cost of living issues. However, experts in the real estate industry have refuted this view, stating that it is a short-sighted approach that is unlikely to alleviate cost burdens, and in the long run, could harm homeowners' interests. The plan may increase homeowners' interest payments, slow down the accumulation of home equity, and drive a surge in demand, further pushing up housing prices in the already supply-constrained market. Growing housing pressure on the US public The latest data from the National Association of Realtors shows that the average age of first-time homebuyers in the United States was 28 in 1991, but by 2024, this age had risen to 38. Data released by real estate agency Redfin shows that households currently spend 39% of their income on repaying mortgage loans. This is because the income needed to repay a mortgage loan for a typical property far exceeds the average income level of American households. Data from Fannie Mae shows that the average interest rate for a 30-year fixed-rate mortgage is 6.22%. This rate has dropped from over 7% in 2023 but is still much higher than the levels below 3% during the pandemic in 2020. A report released last week by the analysis firm Cotality stated that housing inventory in September reached its highest level since 2019. While price growth has slowed in recent months, the significant increase in house prices in recent years has put pressure on homebuyers' affordability. Criticism from the industry However, the Dodd-Frank Wall Street Reform and Consumer Protection Act passed after the 2008 financial crisis to protect consumers currently prohibits the federal government from introducing mortgage products with terms exceeding 40 years or reaching 50 years. Therefore, for Trump to implement this mortgage plan, he must find another way. Some Republican lawmakers in Congress have chosen to distance themselves from Trump and publicly express opposition to this potentially implementable 50-year mortgage plan. Trump's idea is also difficult to gain approval in the real estate industry, as experts generally believe that it is a short-sighted approach that does not effectively reduce cost burdens and may harm homeowners' interests in the long run. Rising interest costs and declining asset net worth If homeowners are required to pay a mortgage for a period of 50 years, the interest they have to pay will increase, and the net worth accumulated on their property will decrease. Experts also warn that the plan could exacerbate demand in the housing market, further driving up prices, which are already restricted due to limited supply. David Dworkin, President and CEO of the National Housing Conference, said, "A 50-year mortgage will greatly diminish the maximum value that homeownership can bring - wealth accumulation. Over time, losses in property net worth will quickly exceed any savings in repayment.". Lawrence Yun, Chief Economist at the National Association of Realtors, said that assuming a $420,000 mortgage loan with a 20% down payment and an annual interest rate of 6.3% - the monthly payment for a 50-year term will be $236 less than a 30-year term. However, Yun stated, "The total cost of this house will rise to about $1.1 million, with interest payments during the loan period exceeding $360,000. And to pay off half the loan principal and interest, it will take about 39 years, meaning that most borrowers will only begin to accumulate significant asset appreciation in the last decade.". According to analysts at UBS, for US medium-priced housing, a 50-year mortgage may reduce borrowers' monthly repayment amounts, but it will also double the interest payments made by homeowners throughout the loan term. In a report released on November 10, the UBS analysts wrote that for a $420,000 medium-priced home with a 12% down payment, and considering loan rates of 6.33% for a 30-year term and 6.83% for a 50-year term, the longer mortgage term could reduce monthly repayments by about $119 or increase the purchasing power of ordinary consumers by nearly $23,000; however, extending the loan term from 30 years to 50 years could double the total interest payments made by homebuyers for a medium-priced home during the loan term. They also stated that extending the loan term means that the assets accumulated by homebuyers during the loan term will grow more slowly. Barriers to actual implementation: Facing legal and party support pressure, the process is lengthy Furthermore, the implementation of this idea will take some time. First, the Consumer Financial Protection Bureau in the US must amend the rules for "qualified mortgage" to allow loans with terms over 30 years to qualify - considering the notification and commenting requirements involved in the rule-making process, this process is expected to take at least a year to complete. However, according to a report from the National Association of Realtors last week, the average age of first-time homebuyers in the US has risen to a record 40 years - people are often buying their first homes at a later age. Fannie Mae and Freddie Mac, both government-sponsored enterprises that control more than half of the housing mortgage market, theoretically could create a market for 50-year mortgage loans by purchasing these loans from lenders. However, the interest of lenders to provide 50-year mortgage loan products may be constrained to some extent by the legal liability protection provided by the "qualified mortgage" rules. Falen Pitts, a spokesperson for the Mortgage Bankers Association, said, "Given that Fannie Mae and Freddie Mac are currently prohibited from purchasing non-prime mortgage products, lenders' willingness to provide 50-year mortgage loan products may be restrained." Although it is currently not clear how the US government could compel banks to offer longer-term housing loans, UBS estimates that government-sponsored enterprises like Fannie Mae and Freddie Mac could be used to purchase these mortgage loans from lenders and package them into securities, which could then be sold to investors, similar to the current mortgage-backed securities products. The analysts at UBS stated that they also expect that the interest rates for 50-year loans will have higher spreads because, under the Dodd-Frank Act, they are unlikely to be classified as qualified loans. The UBS analysts said, "Other potential complexities include: the average age of first-time homebuyers is 40, so they may pass away before the end of a 50-year mortgage term." While the lower monthly payment amount of a 50-year mortgage may be welcomed by some, this model could potentially cause dissatisfaction among other homebuyers in the future. Critics of the plan, including Republican Representative Marjorie Taylor Greene from Georgia, have criticized the idea as a "concession" to banks and mortgage institutions. Trump defends the 50-year mortgage plan, saying it's "not a big deal" "Slow asset appreciation makes it difficult for homeowners to maneuver up and down in house prices," Yun said, referring to homeowners selling homes to exchange for more expensive or cheaper properties. It is currently unclear whether homeowners will face the choice of signing a 50-year mortgage. On Saturday, Federal Housing Finance Agency Director Bill Pratt called the proposal a "game-changer," with the agency working to advance this new housing program. However, a day later, he seemed to change his views, stating that this idea was just "a potential means among a series of solutions we are developing." The Trump administration also stated that it is still too early for any measures to implement a 50-year mortgage. Kevin Hassett, White House Chief Economist, said, "The average age of first-time homebuyers has increased by about 10 years in just a few years, and we are very concerned about this and are working to address it. There is a lot of legal analysis involved, but if legislation is needed for implementation, it won't happen right away." Trump has downplayed criticism of the potential introduction of 50-year mortgage products, saying it will help more Americans afford monthly payments for homeownership. Trump said on Monday, "This is not a big deal at all. It means that the amount you pay monthly will decrease. And this cost will be spread out over a longer period. This is not a significant factor."