Trump’s 50-Year Mortgage Proposal Is A Bad Idea

There are better ways to make homes affordable, ones that don't involve loading Americans with more debt.

50-Year Mortgages Are A Bad Idea

When President Trump’s Federal Housing Finance Agency (FHFA) director, Bill Pulte, floated the idea of 50-year mortgages over the weekend—and Trump amplified it on social media—the proposal sounded to some like a clever way to make homes more “affordable”: lower monthly payments, easier access, more buyers.

But stretching mortgages to half a century isn’t affordability. It’s adding leverage, the kind of bad financial engineering that has inflated every housing bubble since Fannie Mae and Freddie Mac became the government’s favorite credit machines.

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Why Longer Mortgages Don’t Make Homes Cheaper

Whenever policymakers make borrowing easier, home prices tend to rise to meet the new credit capacity. Extending mortgage terms increases the total amount a household can bid for a given property, which pushes prices upward rather than bringing them down.

That dynamic has been documented repeatedly in housing-finance research: when credit conditions loosen—whether through lower rates, smaller down payments, or longer maturities—home prices respond quickly. The mechanism is simple: higher borrowing capacity meets limited supply. The result is higher prices, not greater affordability.

So a 50-year mortgage would simply lengthen the chain of debt that already stretches across generations, while increasing systemic risk. It’s financial engineering that inflates, not innovates—a re-run of the early-2000s experiment with “exotic” mortgages.

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The Good Kind of Financial Engineering

There is a way to make housing more affordable using the same policy levers—by turning them in the opposite direction.

Instead of stretching loans, the administration could use the government-sponsored enterprises (GSEs) to enforce discipline: only buy mortgages with loan-to-value (LTV) ratios of 80% or less.

That kind of cap would gradually deflate the bubble without crashing it. Empirical evidence supports this. A 2019 Journal of Housing Economics study by Jed Armstrong et al. found that LTV caps significantly reduced house-price inflation in markets where they were applied¹. Another study by Laufer & Tzur-Ilan (Federal Reserve / Bank of Israel, 2019) observed that Israel’s introduction of LTV-based capital rules kept prices roughly 2–3 percent lower than they otherwise would have been².

That’s financial engineering too, but the good kind: it reduces leverage, lowers systemic risk, and cools prices through prudence instead of gimmicks.

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Addressing Demand the Old-Fashioned Way

There’s also the issue of demand. According to research summarized by the Urban Institute, immigration inflows equal to 1 percent of a city’s population have been associated with 0.8–9.6 percent higher home prices, depending on local spillovers³. Reversing that inflow—by enforcing existing immigration laws and deporting millions more illegal aliens (and maybe deporting some legal immigrants too)— would ease demand for housing, helping prices reconnect with fundamentals.

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A Better Housing Agenda

So the path to affordable housing isn’t a longer mortgage. It’s a shorter balance sheet — less debt, more equity, and fewer artificial boosters inflating demand.

That’s what a real conservative housing policy would look like:

• shrink leverage (80 % LTV max),

• cool demand through enforcement,

• and let prices reconnect to incomes naturally.

Do that, and 30-year mortgages would suddenly become affordable again — without trapping families in a half-century of payments.

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A Note for Investors

Between support for 50-year mortgages and the mooted $2 000 tariff-refund checks, the Trump administration has made it clear: it plans to run the economy hot while pursuing reindustrialization.

That’s been one of our key investing themes all year—and we’ve got three new trades teed up for Monday that align with it. If you would like a heads up when we place them, and you’re not currently subscribed to this Substack, you can subscribe below.

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References

1. Armstrong, J. (2019). Loan-to-Value Ratio Restrictions and House Prices. Journal of Housing Economics, 44, 88-98. RePEc link

2. Laufer, S. & Tzur-Ilan, N. (2019). The Effect of LTV-Based Risk Weights on House Prices. Federal Reserve / Bank of Israel Working Paper. PDF

3. Urban Institute (2022). How Does Immigration Affect the U.S. Housing Market? Housing Matters