Why the Idea Exists
House prices have outpaced wages for decades. Longer loan terms reduce monthly repayments and make it easier for first home buyers to enter the market.
Current trends:
- Mortgages were 20 years in the 1980s
- Then moved to 25 years
- Now 30 years is the norm
- Some non bank lenders already offer 35 and 40 year terms
Longer mortgages are a response to falling affordability.
The Numbers: 30 Years vs 50 Years
A comparison on a one million dollar loan at 6 percent shows the difference.
Monthly repayments:
- 30 year loan: 5,996 dollars
- 50 year loan: 5,283 dollars
- Difference: about 713 dollars per month
The monthly saving is smaller than most people expect.
Total repayment:
- 30 year loan: 2.158 million
- 50 year loan: 3.169 million
- Extra interest: about 1.011 million
A lower monthly cost comes with much higher lifetime interest.
How It Affects Equity
Equity growth slows dramatically.
In 10 years:
- 30 year loan pays down about 170,000 dollars of principal
- 50 year loan pays down about 90,000 dollars
Slower equity means slower wealth building.
Why People Might Still Choose It
Many buyers do not hold a mortgage for the full term. Most refinance or sell within 7 to 10 years.
Possible advantages:
- Lower repayments compared to rent
- Easier borrowing capacity
- Faster access to the market
- Potential to benefit from capital growth
- Useful for some investors who want higher cash flow
Some renters may find that a 50 year repayment is similar to their current rent.
The Risks and Concerns
There are serious downsides that could affect buyers and the market.
Major concerns:
- Debt could extend into retirement
- Temptation to tap into super to clear the balance
- Emotional fear of a 50 year commitment
- Increased long term interest burden
- Investors could game the system
- Higher borrowing power may inflate house prices
- No improvement to real affordability relative to income
A 25 year old with a 50 year loan would finish at 75. That psychological barrier matters.
Would It Work for Australia
Australia is unlikely to jump from 30 to 50 in one move. A 35 year mortgage is already appearing and may become the next normal.
But longer terms do not solve the underlying issue. Housing is expensive because supply is tight relative to population and income.
Longer mortgages help people service the debt but do not make homes cheaper.
The Real Question
A 50 year mortgage can help some people enter sooner. It can also encourage higher prices and more long term debt. Whether it helps or harms depends on:
- How buyers use it
- How banks manage risk
- Whether it is offered to investors
- How the market reacts to increased capacity
For now, it remains a debate. But Australia is watching closely to see what the United States does next.
