QCI #036 - The 50 Year Mortgage

Let's Talk Economics!

I have been speculating that a 45-year mortgage would be introduced to the US marketplace since Q2 2022, given that inflation has been rising exponentially relative to salaries. Inflation rose by ~20% from March 2020 to December 2024, while salaries rose by only ~2%.

If you read my previous posts, then you know that inflation drives Real Estate prices.

Here is my train of thought: If salaries do not increase and home prices continue to rise due to inflation, then either private companies will have to increase salaries, which, with the adoption of AI currently replacing entry level engineers and Elon Musk purchasing Twitter, laying off 80% of the workforce and making the product better, there have been mass layoffs accross the tech sector; or the market will have to be flooded with new home builds or a Real Estate price cap will have to be introduced in certain cities. Since neither is going to happen, while companies are trying to get employees back in the office, either a 45-year mortgage will be introduced, which is a failure of Capitalism, and the affirmation of Socialism, or employees will move to companies that offer remote work opportunities, and then that lack of demand for overcrowded cities will lower as workers move to remote locations or smaller cities. Correcting prices in inflated markets, driving economic growth and small-business development in smaller regional economies, which would be the success of Capitalism.

The 30-year mortgage was authorized by Congress and introduced to the marketplace in 1948 for new homes and in 1954 for existing homes & refinances. The 30-year mortgage did not become the standard market option until the mid-1960s.

The longer the mortgage, the better it is for the Banks and their shareholders, but not the middle and working class.

The longer the mortgage term, the more interest the mortgagor (homeowner) pays to the mortgagee (lender), typically a Bank.

At the time of this writing: the 10-Year Fixed Mortgage rate is ~5.71% and the 10-Year APR is ~5.78%; the 15-Year Fixed Mortgage rate is ~5.69%-5.79% and the 15-Year APR is ~5.76%-5.78%; the 20-Year Mortgage rate is ~6.10%-6.13% and the 20-Year APR is ~6.19%-6.42%; the 30-Year Mortgage is ~6.25%-6.35% and the 30-Year APR is ~6.41-6.47%.

Let's take a look at the amount of interest paid by the mortgagor to the mortgagee for each of the different mortgage options: