President Donald Trump‘s proposal to introduce 50-year mortgages could pose significant financial risks for both homeowners and lenders, according to Mark Zandi, the chief economist at Moody’s Analytics.
Longer Terms, Higher Financial Risks
In an interview with Newsweek, Zandi pointed out that borrowers opting for a five-decade loan would struggle to accumulate equity, with most payments in the initial decade going toward interest rather than principal.
He said that this could leave homeowners with minimal financial cushion in the event of a housing price drop or unexpected expenses, increasing the risk of loan default.
Due to these heightened risks, Zandi suggested that interest rates for 50-year mortgages would be “significantly higher” than those for standard 30-year mortgages, negating the potential cost savings from the extended repayment period.
Pushback Against Trump’s Proposal
Trump’s push for 50-year mortgages comes as the typical homebuyer now spends nearly 38% of their monthly income on mortgage payments, per Redfin. The president, who has framed his housing agenda around improving affordability for younger Americans, has also indicated he wants to return Fannie Mae (OTC:FNMA) and Freddie Mac (OTC:FMCC) to the public markets.
However, it has sparked a range of reactions. Former Obama economic adviser Betsey Stevenson warned that while such loans might benefit some buyers, they would likely lead to higher borrowing costs and slow equity gains.
Rep. Marjorie Taylor Greene (R-GA) and Investor Kevin O’Leary also criticized the plan, arguing that it would exacerbate the country’s housing affordability crisis.
Millennials And GenZ Show Interest
However, a recent survey by website BadCredit.org shows that Trump’s 50-year mortgages could be a benefit for millennials, potentially easing the path to homeownership for this demographic.
The survey across 1,000 respondents shows 45% of Americans would consider a 50-year mortgage. Support is highest among Millennials (54%) and Gen Z (46%), while interest drops among Gen X (37%) and Boomers (29%).
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.