Trump Suddenly Proposes '50-Year Mortgage'... Is It a Shock from Election Defeat? [Current Affairs Show]

Announced immediately after a direct report from the Housing Finance Agency Chief
A hastily crafted policy following defeat in the mini-midterm elections

■ Broadcast: The Asia Business Daily 'So Jongseop's Current Affairs Show'

■ Host: Political Specialist So Jongseop

■ Producer: Ma Yena

■ Guest: Reporter Lee Hyunwoo

U.S. President Donald Trump made a surprise announcement via social media that he would extend the standard mortgage term from 30 years to 50 years, without consulting the Republican Party leadership or even his White House aides. Despite the fact that housing policy is a highly sensitive issue that directly affects people's lives, Trump announced it on impulse. As it is expected that President Trump will push this policy aggressively, fierce debates have erupted not only within U.S. political circles but also among economic experts.

Announced on SNS after a direct report from the Housing Finance Agency Chief... White House aides caught off guard

Associated Press Yonhap News

It has been confirmed that this announcement was made so abruptly that even those inside the White House were taken aback. President Trump posted the policy on his social media just 10 minutes after receiving a direct report from Bill Pulte, Director of the Federal Housing Finance Agency. What stirred even more controversy was the photo he uploaded: side-by-side images of Franklin Roosevelt, who first introduced the 30-year mortgage policy in the U.S., and himself, with the captions "30-Year Mortgage" and "50-Year Mortgage," respectively. The title was "Great Presidents of America."

Later, it was revealed that Bill Pulte had reported directly to Trump without involving others. Pulte is the grandson of the founder of the major U.S. homebuilder Pulte Group and has been a key supporter of the Trump campaign. Since being appointed as Housing Finance Agency Director in March this year, he has continuously posted praise for Trump on social media and repeatedly pressured Federal Reserve Chairman Jerome Powell to lower interest rates.

In the end, a major housing policy was decided based solely on the direct report of a director with a background in real estate. Republican lawmakers and White House aides learned of the news belatedly and pushed back. There are reports that protest calls flooded the White House to the point that work was paralyzed. Such impulsive and unilateral policy announcements are being seen as unprecedented even within the Trump administration.

A hastily prepared livelihood policy card after election defeat... Attempt to reverse the atmosphere?

Reuters Yonhap News

Experts analyze that this announcement is not unrelated to the recent election defeats suffered by the Republican Party. Following consecutive losses in local elections, including the New York mayoral election, which was dubbed a "mini-midterm," President Trump's political standing had been severely weakened. In particular, the election of Zohran Mamdani-considered one of Trump's political adversaries-as mayor of New York was a major shock.

Mayor Mamdani won by focusing on issues such as grocery prices, rent, and living expenses, presenting policies closely tied to people's daily lives. As the Democratic Party continued to win with livelihood-focused policies amid worsening inflation, Trump apparently felt the need to shift attention and reverse the atmosphere. The mortgage extension policy is widely interpreted as a hastily crafted card for people's livelihoods in this context.

In fact, immediately after the announcement, Treasury Secretary Scott Bessent also unveiled a series of measures related to stabilizing prices, stating that actions to lower the prices of daily necessities such as coffee and bananas would soon be announced. This suggests that the Trump administration was preparing a policy package to stabilize people's livelihoods. However, the problem was that the mortgage policy announcement was made too hastily, and decided by Trump alone.

Typically, extending the mortgage term by 20 years would significantly reduce monthly principal and interest payments, prompting an immediate response from the real estate market. However, the situation in the U.S. is unique. Currently, the 30-year fixed mortgage rate in the U.S. stands at 6.25%. During the COVID-19 period, the rate was only 2-3%, but it has more than doubled in just two to three years.

Due to high interest rates, the U.S. housing market is virtually frozen. Sellers are reluctant to sell because they would have to take out new loans at rates above 6% after selling. Buyers are also postponing home purchases due to the heavy interest burden. As a result, a "frozen market" has formed where neither sellers nor buyers are active.

In this situation, even if the mortgage term is extended from 30 to 50 years, the practical effect is minimal. Unless interest rates fall, simply extending the term cannot sufficiently alleviate the interest burden. The response from ordinary Americans has been cold. Criticism has spread on social media, with people saying, "Are you telling us to keep paying off debt until we die at 90?" Thus, public opinion has formed in direct opposition to Trump's intention of supporting people's livelihoods.

Pressure for rate cuts and the nightmare of subprime

AP Yonhap News

Given President Trump's tendency to push through policies once he is fixated on them, it is expected that he will not easily give up on this mortgage policy either. The problem is that for this policy to be effective, interest rates would have to be drastically lowered. Trump has already been persistently pressuring Federal Reserve Chairman Jerome Powell to cut rates. Since Powell's term ends in May next year, there is a possibility that, once a new chair is appointed, interest rates could be sharply reduced in line with Trump's demands.

This is the scenario that economic experts are most concerned about. If interest rates fall sharply and the mortgage term is extended to 50 years, speculative sentiment in the housing market could explode. There are concerns that the phenomenon of people taking on excessive debt to buy homes, lured by low monthly payments-a trend known in Korea as "Yeongkkeul"-could be replicated in the United States.

The bigger issue is the economic outlook. Asset markets, including the U.S. stock market, are already considered overheated, and many believe they have reached their peak, making a correction inevitable next year. If the housing market overheats temporarily and then crashes during an economic correction, there are warnings that a repeat of the 2008 global financial crisis, triggered by the subprime mortgage meltdown, could occur.

The subprime crisis was caused by the reckless issuance of home loans to borrowers with low credit scores. When these borrowers failed to repay principal and interest, the entire financial system was pushed to the brink of collapse. If 50-year mortgages are combined with low interest rates, a similar situation could arise. The burden of repaying debt over such a long period could lead to mass defaults during an economic downturn.

These concerns are being raised not only by Democrats but also within the Republican Party. Even among Trump's core conservative supporters, there is criticism that this is a "misguided policy." Republican lawmakers have expressed strong dissatisfaction that such a major policy was announced without consultation with party leadership. Since housing policy affects the entire economy, they argue that thorough review and party consensus were needed.

With the midterm elections approaching next year, the failure of this policy would be a major burden for the Republican Party. If the mortgage policy fails to deliver results or has a negative impact on the economy, the Republican Party's position in the midterms could be further weakened. Given that Trump is a politician who is highly sensitive to election outcomes, there is also the possibility that he could reverse the policy as quickly as he announced it if public opinion turns against him.