Fed Chairman Jerome Powell said Tuesday that an increasingly severe crisis in the insurance industry could make mortgages difficult in parts of the country in the coming decades.
“If you fast forward 10 or 15 years, there will be some areas that you can’t mortgage,” he said in his semi-annual testimony to Congress. They think the risks are too high for coastal and prone areas.
As climate change intensifies natural disasters, insurers have been canceling policies nationwide, causing them to suffer billions of dollars in losses. For example, state farms canceled thousands of policies near Pacific Palisades in Los Angeles, before being destroyed by wildfires for months.
Since mortgage lenders often require homeowner insurance as a condition of a loan, potential buyers with alternatives are increasingly buying insurance from state-designed Last Resort insurance companies, which have premiums and higher insurance premiums Insurance coverage is higher than traditional alternatives.
Powell responded to a question from Minnesota Senator Tina Smith, who said banks and insurers would not continue to lend or provide coverage.
In Powell’s testimony, questions about high housing costs have recurred. The Fed chairman reiterated that interest rate normalization may help buyers in the coming years, but many of the issues of affordability come down to lack of supply, which is beyond the Fed’s authority.
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“In the next few years, short-term problems will disappear, but there is a long-term problem with housing affordability, which will be something that our authorities or powers influence,” Powell said in response. (Ruben Gallego) Problem.
Even if interest rates do fall, Powell said lower rates could slow down housing inflation as demand could increase.
“This will free up low mortgages for people, but it can both create buyers and sellers,” Powell said. “It is not clear that this will drive housing inflation.”
When asked about the future of Fannie Mae and Freddie Mac, Powell said the government’s support for the mortgage giant “has indeed lowered mortgage rates.” He said releasing it from protection is ultimately a matter for Congress, adding: “Putting housing financing back to the private sector will have some appeal in the long run.”
