Half-Century Mortgages Test the Limits of Housing Affordability

Former President Trump’s recent proposal to back a 50-year fixed-rate mortgage sparked immediate and widespread criticism. Commentators, including some of his supporters, argued that such a loan would trap Americans in lifelong debt, effectively making them renters from banks. Concerns were raised that homeowners would pay an explosive amount of interest over the loan’s lifetime while building equity at a painfully slow rate.

Rep. Marjorie Taylor Greene (R-Ga.) posted that the plan would “reward the banks, mortgage lenders, and home builders while people pay far more in interest over time and die before they ever pay off their home.”

Despite the backlash, many economists suggest the idea is not as radical as it sounds. “It’s not quite as outlandish as it sounds,” said John Campbell, an economist at Harvard University. Eric Zwick, an economist at the University of Chicago, added, “It’s not obviously so different from a 30-year fixed mortgage.”

The core appeal of a 50-year mortgage is its potential to lower monthly payments, which could help some buyers afford a home. Furthermore, the reality is that most homeowners do not keep their mortgage for its full term. According to a Redfin analysis, the typical American homeowner lives in their home for less than 12 years before moving or refinancing, meaning a 50-year loan would likely serve as a flexible financing tool rather than a permanent debt trap.

The debate highlights the unique nature of the American mortgage market, where the 30-year fixed-rate loan is ubiquitous. This type of loan, which accounts for over 90% of U.S. mortgages, is a product of government intervention. Government-sponsored enterprises Fannie Mae and Freddie Mac buy these loans from private lenders, socializing the significant risks associated with lending at a fixed rate for decades. Without this government role, experts like David Berger, an economist at Duke University, believe “no rational bank would offer this product.”

Long-term, fixed-rate mortgages offer clear benefits, such as predictable housing costs that provide a shield against inflation. When inflation rises, a fixed mortgage payment effectively decreases in real terms. Borrowers also have the valuable option to refinance when interest rates fall.

However, these loans have significant downsides. In addition to higher total interest costs, they result in very slow equity accumulation in the early years. This increases the risk of homeowners going “underwater”—owing more on their mortgage than their home is worth—if property values fall, according to Joseph Gyourko, an economist at the University of Pennsylvania’s Wharton School.

The prevalence of fixed-rate mortgages also creates broader economic challenges. One is the “lock-in” effect, where homeowners with low-interest rates are reluctant to move, even for better jobs. This reduces the housing supply, props up prices, and hinders labor mobility. This system can also weaken the Federal Reserve’s ability to conduct monetary policy, as most homeowners are insulated from the interest rate hikes designed to curb inflation.

Given the current economic climate, some analysts suggest that adjustable-rate mortgages (ARMs) may be a more sensible choice for certain buyers. ARMs typically start with lower interest rates, and for those who can manage the risk of future rate increases, they can be more cost-effective.

Ultimately, economists stress that financial products like the 50-year mortgage do not solve the fundamental problem of housing affordability. The core issue is a critical shortage of housing supply. Policies that stimulate demand without increasing supply—whether through longer loan terms or buyer subsidies—tend to drive prices higher, primarily benefiting sellers. “Given the supply, if you make it easier for buyers, they’re bidding against each other for the same supply,” Campbell said. “The price is gonna go up.”

The consensus is clear: the most effective way to address the housing crisis is to build more homes. While new financing options could offer benefits in a more balanced market, they cannot substitute for an adequate housing supply.



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