President Donald Trump's proposal to introduce 50-year mortgages is generating buzz as a potential solution to America's housing affordability crisis. But according to Mark Zandi, chief economist at Moody's Analytics, the idea comes with serious financial pitfalls that could hurt both homeowners and lenders.

The Equity Problem

Here's the issue: stretching a mortgage out to five decades means your early payments are almost entirely interest. In an interview with Newsweek, Zandi explained that borrowers would struggle to build equity during the first decade of the loan, leaving them financially vulnerable if home prices drop or unexpected expenses pop up. Without that equity cushion, the risk of default shoots up considerably.

And there's another catch. Because of these heightened risks, Zandi predicts that interest rates on 50-year mortgages would be "significantly higher" than the rates on standard 30-year loans. That means the lower monthly payment you'd get from spreading the loan over more years could be wiped out by a higher interest rate.

A Plan Born from Affordability Concerns

Trump's push for extended mortgage terms isn't coming out of nowhere. According to Redfin data, the typical homebuyer now spends nearly 38% of their monthly income on mortgage payments. The president has positioned his housing agenda as a way to help younger Americans get into homes, and he's also indicated plans to return Fannie Mae (FNMA) and Freddie Mac (FMCC) to the public markets.

But the proposal has drawn criticism from multiple corners. Former Obama economic adviser Betsey Stevenson acknowledged that while such loans might help some buyers, they'd likely result in higher borrowing costs and slower equity gains. Rep. Marjorie Taylor Greene and investor Kevin O'Leary have also criticized the plan, arguing it would make the housing affordability crisis worse rather than better.

Younger Generations Are Interested

Despite the warnings from economists and policy experts, younger Americans seem intrigued by the concept. A recent survey by BadCredit.org of 1,000 respondents found that 45% of Americans would consider a 50-year mortgage. The appetite is strongest among millennials, with 54% expressing interest, and Gen Z at 46%. Support drops significantly among older generations, with just 37% of Gen X and 29% of Baby Boomers saying they'd consider the longer loan term.

The generational divide makes sense when you consider that younger buyers are the ones being squeezed hardest by high home prices and elevated interest rates. Whether the proposal moves forward and what form it might ultimately take remains to be seen.