Why Rising Rates, 50 Year Mortgage, & Builder Incentives Might Finally Tackle Affordability

Rate pressure eases from shutdown lows while policy ideas aim at affordability. We weigh 50-year mortgages, transferable notes, builder incentives, and consumer credit reforms with clear pros and cons and practical context for buyers and sellers.

You can find me at mortgagesfrommntoaz on either Instagram or TikTok. Also on social media, Kevnik Mortgage, or you can find me personally on Facebook as well!

Regardless of what platform you're watching on, we would appreciate and love it if you would subscribe, follow, like, and comment. If there's anything you want us to cover in the weeks to come, we're happy to do that!

Angie Gerber - angiegerber@gmail.com

Chapters

• 0:00 Rate Check And Bond Market Move
• 1:37 Inflation Signals And Jobs Outlook
• 3:07 The Case For A 50-Year Mortgage
• 5:37 Transferable Mortgage Notes Explained
• 7:40 Credit Scoring Changes And VantageScore
• 9:15 Builder Incentives Versus Rate Subsidies
• 11:05 Credit Card Caps And Buy Now Pay Later Risks
• 12:40 Affordability Actions, Stimulus Talk, And Wrap

Transcript

SPEAKER_00: 0:37

It is Monday, November 17th, and welcome to your weekly market update with Nikki Erickson. How are you? Good. How are you guys doing? How are you doing? Fantastic.

SPEAKER_01: 0:49

Good. Well, I want to kind of start the week off a little bit with talking, of course, about interest rates and where we're at from a market perspective. The interest rates are actually creeping up a little bit now that the government shutdown is over and things are coming back into normalcy. We have seen the bond market bounce back from that. So late last week, we saw interest rates come back up into the mid-six range. And now they're starting to come back down into that lower six range, but we're still not quite back into the fives yet. So that was when the government was shut down, we had we saw some ability to get into the 5.5%, 5.875% interest rate area. But now with the government back up and running and the bond market a little bit stronger, we're seeing those interest rates come up a little bit. This week we will have the BLS jobs report, and they're expecting a weakened labor market, not as many jobs as projected. And the overall theory is that those reports are actually more accurate now than they have been in the past as far as job creations and things of that nature. So that we'll see what happens there as far as its effect on interest rates. Overall, the the feeling from the market, feeling from the economy is that if we take out the tariff monies and tariffs influence on inflation, we are seeing inflation come down quite a bit, actually. So that's good news. So as these things start to correct themselves, we'll see that interest rates come down and down. There have been some experts in the field that have said that we should be able to realistically get down to interest rates at 3.5%. But they, of course, don't say how long I think that's going to take. So we'll see what happens. We're hoping to be well into the fives by the end of the year, but again, we shall see. Beyond that, the two big topics that the Trump administration has been talking about with regard to the housing shortage and regard to mortgages in general is introducing the idea of introducing a 50-year mortgage. So probably a couple of years ago, the idea started to float around of a 40-year mortgage. And you could see, you could actually find 40-year mortgages in the market. The interest rates were obviously higher than what you would find on a 30-year mortgage, but they didn't really gain in popularity because that 10, that extra 10 years obviously adds a lot more interest and a lot more, you know, time onto the mortgage. The concept of this 50-year mortgage is just saying, like, let's get some payment relief for increasing housing costs. And the idea behind it is that, you know, obviously it lowers your payment when compared to a 30-year mortgage. What the general idea of it is people, you know, in general, it wasn't really a favored idea at first. But then if you really think about it, for a first-time home buyer or someone who is going in to purchase a property where they're only going to be in this property for five to seven years, or that's their actual plan, it's not entirely, in my opinion, a bad idea to consider a 50-year mortgage. The reason for that is anytime you do a mortgage, no matter what the term is, most of the time, let's talk about 30 years, you are paying interest for the first five years. You're paying a lot of interest in the first five years and barely any principal off. So the same, you know, theory applies to the 50-year mortgage. You're paying interest, you're not paying much principal off. And, you know, if you're only going to be in the home for five to seven years, does it really matter if it's a 50-year mortgage? And so, you know, my personal opinion is it's something definitely to consider if it does get pushed through, it'll probably help a lot of first-time home buyers, definitely help a lot of people who, you know, are in their home right now with 2 to 3% interest rates, maybe consider moving to another home or upgrading or doing whatever they can in order to accommodate for that. The other option or the other idea that the Trump administration has presented has centered around the idea of transferring your mortgage note. So, in other words, the interest rate that you have on your current home, transferring that note from one property to another. So you rewrite that note at the same interest rate with the remaining term for the next property that you own. This is kind of a back and forth, like, will this work? Will this not? They say that, you know, if people were able to take their 2% interest rate, let's say they owe$300,000 on their mortgage and that at 2% and they were able to grab that remaining amount and transfer over to another property. They say that it would predict about 44 million more listings to come out if people were allowed to do that. So it's an idea that's out there. Of course, nothing has come to fruition, but it's definitely something that the administration is working with FHFA on from a Fannie and Freddie standpoint to say, okay, how are we going to really come up with some good long-term solutions to make housing more affordable? And, you know, if we really think about it, it's a it's quite the undertaking to take a mortgage note that is attached to a property and re-qualify the borrower for any additional funds and go to the next property. But that's all semantics. Of course, that'll all be worked out. But yeah, the recording process, the mortgage process, the attaching the lien to the property, you know, those things are gonna all have to be worked out. So it's just an idea that's been floating out there to transfer that, you know, mortgage note to the next property. And of course, then they don't res they don't solve the problem of let's say you have owe 300,000 at 2%. What if you want to buy a$500,000 house? How where are you gonna get that extra$200,000 if you don't have that much equity in your current home? So a lot of things to think about and work out, but um, it could be a possibility. It could help some homeowners, you know, that are currently in a two-bedroom home and you know are having kids and need to go to a three-bedroom or whatever that is. So it'll it'll be interesting to see what happens.

SPEAKER_00: 6:28

Yeah. Are there any timelines that you can forecast or foreshadow of either the 50 year or are that the I I have a feeling the 50 year is going to be the bigger push than the transferable mortgage.

SPEAKER_01: 6:42

There's no set timelines right now. It's just something that they're talking about because, you know, on the administration's agenda, housing is one of the, you know, hot topics and something that does need to be resolved. So it's just a matter of how are we going to, you know, are there going to be some positive changes that are happening? If you remember, we were talking like three, four months ago about the vantage score coming into the mortgage industry and being able to be used for qualifying buyers. What the vantage score, of course, is a different, different than FICO score. It talks about more real-world, like paying rent, paying utilities, things of that nature, and scores you based on your everyday living versus just what reports to credit. That is allowed in the industry, but zero changes have been made to software systems, you know, running of automated approval systems, things of that nature. No progress has been made on that. So, although we are allowed to do it, there's just not the technology right now that has that they worked on in order to do it. So it's it'll be interesting to see it. I mean, even that's gonna take another, probably another year to come to fruition. So, yeah, these 50-year mortgages, who knows?

SPEAKER_00: 7:51

Yeah, I'm so I was hoping you would address that because I tell you what, the the internet going crazy happens, and I mean, and do you believe there have I mean there's some really strong feelings out there? So it's like, wow. So I'm I'm glad because there are some instances. I mean, there's two so sides to everything, the polar opposite.

SPEAKER_01: 8:14

So I I saw a lot of reaction, reacting responding to I think the negativity comes from you know, people saying, Oh, if you're 30 and you buy a house, you won't pay off your house until you're 80. It's like the the chances of somebody even staying in a home for 30 years are very slim to nil at this point, anyway. I mean, people usually move every five to seven years. So if you really think about it, yes, you are paying more interest to the banks over time if you were to get that 50-year mortgage. However, the first five years and that 30-year mortgage, you're paying all your interest anyway. So it's just something that, you know, for me, it's you know, and just the clients that I help and the things that I see, it's like, you know what? There was a big uproar when mortgages went from 15 to 30 years, too.

SPEAKER_00: 9:00

Yeah, it is, and it's just it's just kind of it is a tool that can be used in some instances, it doesn't have to in every instance, and it's not gonna be right for everyone, just like nothing is so I love that. And I know I've heard a lot too about like the administration looking at how to bring more builders in and get the new construction up and going again. Do you have anything on that front to share? Yep.

SPEAKER_01: 9:30

So they what they're trying to do is say, okay, instead of offering subsidies to interest rates for first-time homebuyers, for example, you know, there's a lot of money that gets flooded into Fannie and Freddie that, you know, from the budget that has offers lower interest rates for people, you know, under certain income limits, things of that nature. And there's all those, all that money in order to offer those lower interest rates go somewhere, right? But are we really helping that first-time homebuyer? Are we really helping them with that subsidized interest rate? Because we're talking like, you know, a three-eighths of a percent lower, which is great. But can that money be spent somewhere else, i.e., offering builders subsidies to pay for the construction of certain portion of the house, whereas that cost doesn't get passed on to the borrower. So, in other words, let's just say you have a builder and they say, okay, it's gonna cost me$200,000 to build this house. Can I get$100,000 of it covered? You know, or let's just, I'm just using general numbers. Can I get$100,000 of it covered by, you know, federal money so that I can I only have to charge$300,000 for this house instead of$400,000? You know, things of that nature. So that's the idea behind it, is to get that more competitive advantage from a builder standpoint to offer them money to build more homes, basically, is the idea behind it.

SPEAKER_00: 10:53

Yeah, I just was wanted to touch base on that to get your insight and legal on what that looks like. So thank you for that.

SPEAKER_01: 11:01

Yeah, and it's interesting to see, like over the years, I've seen different administrations try to tackle the housing, you know, issue of you know, housing shortage or higher interest rates or first-time home buyer issues or the cost of housing, things of that nature. You've seen throughout the years different administrations. The Biden administration, if you remember correctly, they started offering lower interest rates to people with lower credit and lower down payments in comparison to people with higher credit and higher down payments. That adjustment has pretty much gone away. I mean, you do get a sub like a better interest rate for a loan amount that's under$150,000. And you also get a better interest rate if your income is lower than 50% of the area median income. So there still is that small adjustment, but it's no longer people with higher down payments and higher credit scores are paying higher interest rates. That's not, you know, in comparison to, you know, your straight run-of-the-mill market, you know, straight down-the-line borrowers. So that's the good news is that we've seen that kind of not be a thing in as much anymore as it used to be. So it didn't work. You know what I mean? It didn't really help anybody because if you can't, if you have low credit and you don't have high income, the chances of you being able to afford a house in in the first place is kind of crazy. You know, it's it's probably not gonna happen. So it didn't help as many people as I thought it would.

SPEAKER_00: 12:31

Yeah, it was very interesting. One to explain to my conventional 20% Don clients. I was like, oh wow Congratulations, you now have a higher interest rate. I get it, and yet it, yeah, that that makes sense that it goes as far as plans. So, no, that's definitely the other thing too. I was wanting to touch based on again, just watching the news and hearing everything going on. What would it look like if we do go down the administration goes down the line and the whole rabbit hole of like credit card and that interest rate or your personal loans or your HELOCs and taking those interest rates down? Can you talk about that at all and what that would look like pro and con?

SPEAKER_01: 13:18

Yeah. So there is some talk about limiting credit card or max maxing out the interest rate you could pay on a credit card. So, for example, the the number 9.99 has been thrown out there saying, you know, these credit card companies can't charge more than 9.99% on any given credit card, you know, things of that nature. So that idea has been thrown out there. The big deal right now, though, is not necessarily the credit card, it's the buy now pay later. The buy now pay later loans, in my opinion, are pretty predatory as far as the amount of interest they charge, how you pay for things over time, and you're getting a product, and yeah, that's great, but you're paying sometimes two, three, four times the actual cost of that product because you're doing a buy-now pay later. The big thing with buy now pay later is also they don't report to credit. So there's really no advantage, you know, for you as a consumer to be able to do those, except for the idea that if you are late or don't make the payment, it doesn't get reported. But the default, the rate of default on those buy now pay later is something like 44% or something huge like that. So in order to make things more affordable, there has been talk about, yeah, let's limit the amount of interest you're can pay on a credit card. Also, keep in mind the interest that you pay on a car loan now can be is part of that tax bill. A portion of it or a certain amount of it is now tax deductible. So there are some things that have happened that are gonna, you know, that they're trying that the administration is trying to help with affordability. Will this, you know, all these things put together could help? It's just a matter of time. We just have to wait and see.

SPEAKER_00: 15:02

Yeah. Yeah, I just wanted to, since we're it feels like the the theme and the topic for today. So just keep bringing out at once.

SPEAKER_01: 15:10

Yeah, it is. Like, how can we, you know, affordability is really the huge, the huge topic right now, especially with the tariff money coming in. There are talks about that$2,000 stimulus check. There's talks about, you know, 50-year mortgages, making things more affordable. How can we do this? How can we do this? And if anyone has kind of just watched the news and things like that, this administration is an administration of action in a lot of ways. Like they'll try things over and over. You know, you can kind of see them starting to try things. And, you know, even if they're not all that popular of things to try, at least, you know, they do talk and there is talk about, you know, actually trying to help, which is nice. Yeah, absolutely.

SPEAKER_00: 15:47

Well, good. Well, this is another jam-packed, wonderful Monday market update. Really appreciate it. And are we going to meet next week with the short week? I don't know. Maybe we'll see. Perfect. All right. Well, Nikki, where do they find you with questions or more? Yes, absolutely.

SPEAKER_01: 16:06

You can find me at mortgages from M N to A Z on either Instagram or TikTok. Also on social media, Kev or on uh Facebook, Kevnik Mortgage, or you can find me personally on Facebook as well.

SPEAKER_00: 16:18

Perfect. And I will also link that below or have that in the notes as well. So, regardless of what platform you're watching on, we would appreciate and love it if you would subscribe, follow, like, and comment. If there's anything you want us to cover in the weeks to come, we're happy to do that. And Nikki, again, thank you so much for taking your time every week to help us out. It's very valuable and appreciate you.

SPEAKER_01: 16:43

Absolutely, not a problem at all. All right, have a good one.

SPEAKER_00: 16:46

Yeah, bye-bye. Bye.