On Saturday, November 8th, US President Trump proposed the introduction of 50-year mortgage loans to reduce monthly repayments and increase housing affordability.
However, the Dodd-Frank Act passed by Congress following the 2008 financial crisis only allows for mortgage loan terms of 30 years or shorter. Analysts say that while longer loan terms can lower monthly payments, it can also slow down the accumulation of home equity.
President Trump posted a picture on the social media platform Truth Social on Saturday. It showed Franklin Delano Roosevelt on the left with the label “30-year mortgage loan,” and President Trump himself on the right with the label “50-year mortgage loan.”
Bill Pulte, Director of the Federal Housing Finance Agency (FHFA), later replied on X platform, saying: “Thank you President Trump, we are indeed studying the 50-year mortgage loan – this will completely change the game rules.”
However, the White House did not provide any further details.
President Trump has always been concerned about housing affordability issues. On his first day in office, he issued an executive order on housing emergency price relief. He has also continuously pressured Federal Reserve Chairman Jerome Powell to lower interest rates.
The benefits of extending the fixed-rate repayment period for mortgage loans include reducing the monthly repayment amount.
For example, with a $300,000 loan from Fannie Mae, assuming a 20% down payment, a mortgage rate of 6.575%, excluding property taxes or insurance; if it is a 30-year fixed-rate, the monthly payment would be $1,529 including principal and interest; for a 40-year fixed-rate, it would be $1,418; and for a 50-year fixed-rate, it would be $1,366.
However, the drawback of extending mortgage loan terms is that it would also reduce the homeowner’s accumulation of home equity, and in some cases, the savings may be minimal.
Furthermore, there are legal obstacles to 50-year mortgage loans. After the financial crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which tightened mortgage approval standards, not allowing for 40 or 50-year mortgage loans. If the President’s proposal is to be widely adopted, it would require Congress to amend the law.
Logan Mohtashami, Chief Analyst at Housing Wire, does not support extending loan terms.
She believes that subsidizing 30-year or 50-year mortgage loans will stimulate more demand and inject more subsidies into the housing market, which will not only hinder the market’s self-regulation but also reduce the accumulation of home equity.