Dr. Thomas J. Powell examines 50-year mortgages, comparing them to Japan's failed 100-year mortgages in the 1980s-90s. A 32-year-old borrower wouldn't finish paying until 82, and most people move several times anyway. Powell argues that lowering rates by 1% achieves the same effect, while real fixes require tackling land-use, zoning, and construction costs.
Questions this video answers
100 years
A 1% reduction in interest rates
Fannie Mae, Freddie Mac, HUD (and loan servicers)
82
Five to six times
Chapters
Hey, Tom Powell here with the Powell perspective and the Just Ask dad segment. Candice was asking me today about the 50 year mortgage. That's all the hype and my thoughts regarding it and I've written a blog piece on it. But I'll go back in history just a bit. So in the 80s and 90s when Japan's inflation rates, especially property inflation rates.
Were through the roof, at the time.
It was actually estimated that one small segment of land in Japan was worth the entire state of California, which is just absolutely ridiculous and out of perspective.
The idea was floated for 100 year.
Mortgage which meant that your legacy descendants would be signing on to a mortgage before they were even created or born. And it caused a lot of thoughts and in my own head what it thought was how do you do that and just do it through lower interest rates.
And that's actually what Japan mostly did was through lower interest rates which they.
Lived in an almost zero interest rate environment for almost two decades to get that inflation of property under control. Now again, you have a high density of people on a small piece of.
Property in the United States. We have a lot of land, it.
Is a very large country. We just have a lot of improper land use scenarios that keep the cost of housing up tremendously higher than it needs to be.
But a simple fix, instead of going more than 50 years out, which means somebody's 32 years old, they're going to.
Be 82 when they actually pay it.
Off, is not a good idea. Especially when you can look at it.
That a 1% reduction in interest rates.
Will be about the equivalent of what.
That 50 year mortgage would be.
So you've got to ask the question.
Who WINS On a 50 year mortgage?
Well, the lenders definitely do. Fannie Mae, Freddie Mac, hud, who, the servicers of those loans, if they actually go the 50 years, it's not just about the interest rate that's actually absorbed.
By the bond market.
It's the additional 50 to 75 basis.
Points or a half of a percent.
That'S paid in servicing every single year.
By that borrower to that servicer that creates a portfolio.
So it's one more way of somewhat creating indentured servants of the people of the United States.
Let's look for better alternatives.
Let's get the cost of housing down.
Through right pricing of mortgages, right pricing of the entitlements and the abilities to actually construct housing.
Let's not just go for a knee.
Jerk reaction that reduces a mortgage by $200 when we can actually make some systemic change that makes a difference in this country.
That's Tom Powell. That's Ask Dad. And by the way, that didn't answer the question of should you take out the mortgage? Well, you're probably never going to live for the 50 years because you'll probably.
Move through five, six times of that housing.
So it really doesn't change much in the scenario. And if it helps you qualify, then.
