In another attempt to make home buying more affordable, President Donald Trump floated the idea of a 50-year mortgage in a social media post. In response, Bill Pulte, director of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, announced that they were “working on it” and that it would be “a complete game-changer.”
The purpose of a longer-term mortgage is to lower the monthly payment for homeowners. The longer the term of the loan, the lower the monthly capital required to pay off the loan in full. But such a plan has other trade-offs.
Using the latest average home sales price in September of $415,200, according to the National Association of Realtors, and the current interest rate of about 6.3%, according to Mortgage News Daily, for a 30-year fixed loan with a 20% down payment, the monthly payment for principal and interest only would be $2,056. If you increase the term to 50 years with the same interest rate, the payment will be $1,823, a savings of $233 per month.
However, homeowners would not build up equity as quickly because their repayments would be lower. The amount of interest paid to lenders would be 40% higher.
How it could work
The real question is whether Fannie and Freddie can pull it off. Analysts think it's possible, but a 50-year mortgage doesn't currently meet the definition of a qualified mortgage under the Dodd-Frank Act, which offers investors protection through Fannie and Freddie if a loan defaults. But regulators were given the power to change this to ensure mortgage affordability. However, this could take up to a year as it requires congressional approval, according to Jaret Seiberg, financial services and housing policy analyst at TD Cowen.
“Fannie and Freddie could establish a secondary market for 50-year mortgages before the guidelines change. They could even purchase mortgages for their retained portfolios. However, this would not change the legal liability of lenders. For this reason, we believe that lenders without QM will not issue 50-year mortgages.” [qualified mortgage] Policy changes,” Seiberg wrote in a note to customers.
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How it would affect interest rates
Then there is the question of the mortgage interest rate. According to the Mortgage Bankers Association, the average interest rate on the 15-year fixed mortgage is currently 66 basis points lower than the interest rate on the 30-year fixed mortgage. This would mean the interest rate on the 50-year fixed would be higher. It all depends on investor demand for the product.
“There is currently no secondary market for such loans and no robust secondary market will emerge any time soon,” said Matthew Graham, chief operating officer at Mortgage News Daily. “This means that in addition to the extremely low principal repaid in earlier years of the loan, interest rates would also be quite a bit higher than 30-year loans – a double whammy for those hoping to build equity.”
Graham said that from a practical perspective the loan would be more like an interest-free loan as very few people would keep a home for 50 years. Homeowners could still gain equity from rising home prices, but prices have fallen rapidly across the country this year and are nowhere near the rise seen in previous years.
How it affects affordability
Even real estate agents agree that the savings for homeowners would be minimal.
“This is not the best way to solve the housing affordability issue. The government would do better to reverse tariff-induced inflation that is keeping interest rates on existing mortgages high,” Joel Berner, senior economist at Realtor.com, wrote in a press release.
Others point out that this new mortgage product would likely depend on Fannie Mae and Freddie Mac remaining under government supervision. The Trump administration has announced that the two will be privatized and will hold an initial public offering sometime in the near future.
“The introduction of a 50-year mortgage product could complicate the path to privatization for Fannie Mae and Freddie Mac,” analysts at Evercore ISI wrote in a note to clients. “Nevertheless, we understand that the administration expects that the GSEs will remain under conservatorship following the sale of approximately 5% of the shares 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 due to pandemic-related economic policies led to a historic run on the real estate market, driving up home prices by more than 50% in just five years. As a result, home sales have fallen dramatically, as has mortgage demand.
The average age of a typical first-time buyer in 1991 was 28 years old. In 2024, it was 38, according to a report from the National Association of Realtors, whose deputy chief economist called the number “shocking.”
The Trump administration has pressured builders to build more homes to drive down prices, claiming they are sitting on an oversupply of vacant properties. Builders dispute this claim and continue to cite high costs for land, labor and materials.
Regarding the company's most recent earnings announcement: PulteGroup CEO Ryan Marshall said he agreed with the president's sentiments about a short supply of about 4 million homes for sale, but added: “While this supply deficit certainly impacts affordability in general, the complexity of the new home construction industry means that addressing a problem of this magnitude requires a coordinated and comprehensive approach that brings together federal, state and local leaders working with the new home construction industry.”