Powell predicts when mortgages will be impossible to enter a part of us.
The growing crisis in the insurance industry could make it difficult for parts of the country to acquire mortgages in the coming decades, Federal Reserve Chairman Jerome Powell said Tuesday.
“If you fast forward 10 or 15 years, there will be areas of the country where you can’t get a mortgage,” he said in his six-month testimony to Congress. Coastal and fire-prone areas they think are too risky.
Insurance companies are canceling policies across the country as climate change intensifies natural disasters and grieves them with billions of dollars of losses. For example, State Farm cancelled thousands of policies in Los Angeles’ Pacific Palisade area a few months before it was devastated by wildfires.
Mortgage lenders typically require homeowner insurance as a loan condition, so future buyers with few alternatives can have higher premiums and camper coverage than traditional alternatives. Masu.
Banks and insurance companies will not continue to provide loans and coverage when they face evidence of a disaster, Powell said in response to a question from Minnesota Sen. Tina Smith.
Questions about high housing costs have repeatedly risen through Powell’s testimony. The Fed chair has reiterated that interest rate normalization could help buyers in the coming years, but many of the issues of affordability will be summed up in the supply shortage, an issue outside the Fed’s scope .
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“There are short-term issues that will disappear in the coming years, but there are long-term issues with affordability in housing, which will not affect our authorities and influence.” Powell said: Questions from Senator Reuben Gallego.
Even if interest rates drop, Powell said it is “not clear” that lower rates would slow housing inflation as demand is likely to increase.
“It unlocks people’s low mortgages, but it creates both buyers and sellers,” Powell said. “It’s not clear that it will push down housing inflation.”
When asked about the future of Fannie Mae and Freddie Mac, Powell said the government’s support for the mortgage giant “is keeping mortgage rates down.” He added that releasing them from their parents would ultimately be a question for Congress, and that “returning housing finance back to the private sector will be attractive in the long term.”