The 50-Year Mortgage: A Market Stabilization Tactic

The proposed 50-year mortgage is not primarily intended to make houses more affordable; rather, it is designed to keep the housing market from collapsing. One must understand that, in the long term, house prices are only going to get more expensive. The main reason is that homeowners are much more likely to vote, and the majority of voters possess assets. Therefore, driving up housing prices is actually beneficial to most of the voting populace.

For President Trump, both the housing market and the stock market are always paramount. The problem is that the housing market is already showing cracks. The median age of a first-time home buyer is now 40 years old, a significant shift from the past when starter homes were typically purchased by people in their late 20s or 30s.

We are also seeing more defaults on car loans, which normally have a term of five years. In response, the Trump 2.0 administration is proposing a 15-year car loan, which is even more absurd than the 50-year mortgage. While the housing market has historically seen an increasing price trend, cars are always a depreciating asset. Cars will not appreciate in value, and many cannot even be reliably driven after 10 years.

Many people think these 50-year mortgages and 15-year car loans are stupid ideas that banks and lenders will never accept. In my opinion, however, I believe that banks will not only accept them, but will also force people to take those loans.

The target audience is never the 20- or 30-year-olds; it is the people who already have existing mortgages and car loans. We are currently seeing more defaults on existing loans, and house foreclosures are increasing at a record speed. When these defaults pile up, banks will eventually be forced to sell a large number of properties at very cheap prices, effectively driving down overall housing prices.

This is certainly not what Trump wants to see, especially since a collapse of the housing market is always bad for the stock market, exposing further risks to an already expensive stock market. This situation presents a systematic risk, as many people are struggling just to make their monthly mortgage payments.

Therefore, banks will have no choice but to encourage people who are having a hard time paying their monthly installments to switch to the 50-year mortgage and 15-year car loan options. This allows them to further "juice" money from people who, in turn, have no choice either because they do not want to default and lose everything.

Does this seem like a win-win situation? It only pushes the inevitable time bomb to a later date. Eventually, that bomb will explode, causing an even worse recession. But for now, everything will be fine—except for the people waiting for a housing market crash in order to buy their first home.