White House’s 50-year mortgage proposal has one notable benefit but a number of drawbacks

By KEN SWEET NEW YORK AP The White House says it is considering backing a -year mortgage to help alleviate the home affordability situation in the country But the announcement drew immediate criticism from policymakers social media and economists who commented a -year mortgage would do little to resolve other core problems in the housing realm such as a lack of supply and high interest rates Related Articles Shutdown leaves a mark on an already-struggling commercial sector from lost paychecks to canceled flights Establishment shutdown will have lasting effects on National Guard advocates say Trump asks Supreme Court to throw out E Jean Carroll s million verdict Senate approves bill to end the shutdown sending it to the House Trump pardons Rudy Giuliani and others who backed efforts to overturn his electoral contest loss Bill Pulte director of the Federal Housing Finance Agency noted on X over the weekend that a -year mortgage would be a complete challenge changer for homebuyers FHFA is the part of the federal establishment that oversees Fannie Mae and Freddie Mac which buy and insure the vast majority of mortgages in the country The -year mortgage is a uniquely American financial product and the default way to buy a home since the New Deal Politicians and policymakers at the time yearned to create a standardized mortgage that borrowers could afford and pay off during their working years when the average lifespan for an American was years old Lower payment Extending the life of a mortgage to years does decrease a borrower s monthly payment The average selling price of a home in the U S was in September according to National Association of Realtors Assuming a standard down payment and an average interest rate of the monthly payment on a -year mortgage would be while the payment on a -year mortgage would be That s presuming a bank would not require a higher interest rate on a -year mortgage due to the longer duration of the loan But significantly higher interest Because even more of the monthly payment on a -year mortgage would go toward interest on the loan it would take years before a borrower would accumulate in equity not including home price appreciation and the down payment That s compared to - years to accumulate in equity when paying off a -year mortgage excluding the down payment A borrower would pay roughly an additional in interest over the life of a -year mortgage compared to a -year mortgage according to an AP analysis Other analysts came to a similar conclusion Extending a mortgage from years to years could double the dollar amount of interest paid by the homebuyer on a median priced home over the life of the loan and significantly slow equity accumulation wrote John Lovallo with UBS Securities Broader housing issues A -year mortgage does nothing to solve one critical issue when it comes to housing affordability the lack of supply of homes States like California and cities like New York have in the last few days passed act or made regulatory changes to allow builders to build homes faster with less regulatory red tape There s also the raw cost of homebuilding in the country Products such as steel lumber concrete copper and plastics that go into home construction are now subject to tariffs under President Trump Further various construction jobs were being done by undocumented workers particularly in the Southwest where deportations are impacting the ability for homebuilders to find enough labor to build homes Various of the big things that would address supply right now are going in the wrong direction announced Mike Konczal senior director of initiative and research at the Economic Measure Project Pulte disclosed on X that the introduction of a -year mortgage was just a promising weapon among other solutions the White House has considered to combat high housing prices American don t live long enough The average age of a first-time homebuyer has been creeping up for years and is now roughly years of age A -year mortgage would be complex to underwrite for a bank for a -year-old first-time homebuyer who would be years old by the time that home is paid off The average life expectancy of an American is now roughly years meaning there s years of life expectancy not covered in a -year loan It s typically not a goal of policymakers to pass on mortgage debt to a borrowers children Konczal mentioned Others have tried longer loans Other parts of the financial system have extended loan terms to mixed results The seven-year auto loan has become increasingly common as car prices have risen and Americans keep their cars longer Despite longer loan terms auto loan delinquencies have been rising and the average price of a new car is now compared to a price of for a new van five years ago Scholar loans were originally designed to be paid off in years and now there are multiple payment options that extend repayment out to years Economists pointed out that a -year mortgage may do the opposite of helping with home affordability by causing home price inflation by introducing more promising buyers into a realm struggling with supply Trump downplays idea After vital criticism President Trump seemed less enthused about the -year mortgage When appealed by Laura Ingraham of Fox News about the idea President Trump announced it might help a little bit but seemed to brush it off Under the Dodd-Frank Act the mortgage giants Fannie Mae and Freddie Mac cannot insure a mortgage that is longer than years so any -year mortgages issued before Congress amends the law would be considered a non-qualifying mortgage and would be more complex to sell to investors Congress would have to amend U S financial laws in multiple places to allow -year mortgage and there seems to be little appetite for Congress to take this on without delay