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Trump proposes 50-year mortgage, but homeowner savings could be minimal
In another attempt to make homebuying more affordable, President Donald Trump floated the idea of a 50-year mortgage in a social media post. In response, Federal Housing Finance Agency director Bill Pulte, who oversees Fannie Mae and Freddie Mac, posted that they are “working on it,” and that it would be, “a complete game-changer.”
The purpose of a longer-term mortgage would be to lower the monthly payment for homeowners. The longer the term of the loan, the smaller the principal needed each month to pay it off in full. But such a plan has other trade-offs.
Using the latest median sale price of a home from September, $415,200, according to the National Association of Realtors, and the current interest rate of about 6.3%, according to Mortgage News Daily, on a 30-year fixed loan with a 20% down payment, the monthly payment of just principal and interest would be $2,056. If you raise the length to 50 years, at the same interest rate, that payment would be $1,823, a savings of $233 per month.
Homeowners, however, would not build equity as quickly because their principal payments would be smaller. The amount of interest paid to lenders would be 40% higher.
How it might work
The real question is can Fannie and Freddie do this. Analysts say it is possible, but a 50-year mortgage does not currently meet the definition of a qualified mortgage under the Dodd-Frank Act, which provides investors with a backup from Fannie and Freddie if a loan goes bad. But regulators were given the authority to change that in order to insure mortgage affordability. That, however, could take up to a year, given the need for congressional approval, according to Jaret Seiberg, a financial services and housing policy analyst at TD Cowen.
“Fannie and Freddie could establish a secondary market for 50-year mortgages in advance of policy changes. They even could buy mortgages for their retained portfolios. Yet this would not alter the legal liability for lenders. It is why we believe lenders will not originate 50-year mortgages absent QM [qualified mortgage] policy changes,” wrote Seiberg in a note to clients.
How it would impact rates
Then there is the question of the mortgage rate. The average rate on the 15-year fixed mortgage is currently 66 basis points lower than the rate on the 30-year fixed, according to the Mortgage Bankers Association. This would imply that the rate on the 50-year fixed would be higher. It all depends on investor demand for the product.
“There is not currently a secondary market for such loans, nor would a robust secondary market be cultivated any time soon,” said Matthew Graham, chief operating officer at Mortgage News Daily. “That means that, in addition to the extremely low amount of principal paid down in earlier years of the loan, the interest rates would also be quite a bit higher than 30-year loans — a double whammy for those with any hope of building equity.”
Graham said that for all practical purposes, the loan would be more akin to an interest-only loan, because very few people would keep a home for 50 years. Homeowners could still gain equity through home price appreciation, but prices have been softening swiftly across the nation this year, with nowhere near the appreciation seen in the years previous.
How it impacts affordability
Even realtors agree that the savings to homeowners would be minimal.
“This is not the best way to solve housing affordability. The administration would do better to reverse tariff-induced inflation, which is keeping the rates on existing mortgages high,” wrote Joel Berner, senior economist at Realtor.com in a release.
Others note that this new mortgage product would likely depend on Fannie Mae and Freddie Mac remaining under government conservatorship. The Trump administration has said that the two will be taken private and then have an initial public offering sometime in the near future.
“Adoption of a 50-year mortgage product might complicate the path to privatization for Fannie Mae and Freddie Mac,” analysts at Evercore ISI wrote in a note to clients. “That said, we understand that the Administration is expecting the GSEs to remain under conservatorship after it sells roughly a 5% stake to the public. This would allow the Administration to maintain control of the GSEs for the foreseeable future.”
Home affordability has been a major pressure point for the Trump administration. Historically low interest rates resulting from pandemic-driven economic policy caused an historic run on housing that catapulted home prices more than 50% higher in just five years. As a result, home sales have weakened dramatically, as has mortgage demand.
The average age of a typical first-time buyer in 1991 was 28. By 2024, it had reached 38, according to a report from the National Association of Realtors, whose deputy chief economist called the number, “shocking.”
The Trump administration has been pressuring builders to put up more homes in order to ease prices, claiming they are sitting on an oversupply of empty lots. Builders contest that claim and continue to cite high costs for land, labor and materials.
On the company’s latest earnings call, PulteGroup CEO Ryan Marshall said he agreed with the president’s perspectives as it pertains to an undersupply of roughly 4 million homes for sale, but added, “While this supply deficit certainly has an impact on affordability generally, the complexities of the new home construction industry dictate that tackling a problem of this scale requires a coordinated and comprehensive approach that brings together federal, state, and local leaders working in partnership with the new home construction industry.”
