Federal Reserve Chair Warns of Future Mortgage Accessibility Crisis

Federal Reserve Chairman Jerome Powell highlighted a potential crisis in the mortgage market during his recent testimony to Congress, stating that escalating insurance costs could make obtaining a mortgage unattainable in certain regions of the U.S. in the coming decades. “If you fast-forward 10 or 15 years, there are going to be regions of the country where you can’t get a mortgage,” Powell warned, linking the issue to banks and insurers exiting high-risk areas due to climate change-related disasters.

The situation is exacerbated by many insurers, like State Farm, canceling policies in vulnerable locations, leading prospective homebuyers to rely on state-sponsored insurers that often impose higher premiums and provide limited coverage. Powell stressed that mortgage lenders typically require homeowners insurance, making it increasingly difficult for buyers in high-risk areas.

Although Powell noted that interest rate normalization could eventually assist buyers, he emphasized that a significant long-term issue remains: housing supply inadequacy. He pointed out, "There's a longer-term problem with housing affordability, and that’s going to be something that’s not within our authorities."