Several Democratic senators on Sunday called on Federal Reserve Chairman Jerome Powell to cut interest rates, which they said led to the country's housing affordability crisis.
In a letter to Powell, Sens. Elizabeth Warren, D-MA; John Hickenlooper, D-CO; Jacky Rosen, D-NV; and Sheldon Whitehouse, D-R.I. argued that the rising interest rates have resulted in higher costs for homebuyers and renters in the country. They also argued that the interest rates led to fewer new home constructions.
"We write regarding the current state of the housing market and ongoing concerns that high interest rates have aggravated the country's persistent crisis of housing access and affordability. Mortgage rates have risen to 20-year highs in the past year-a direct result of the Federal Reserve's (Fed) campaign of aggressive hikes to the federal funds rate," the letter read.
"As the Fed weighs its next steps in the new year, we urge you to consider the effects of your interest rate decisions on the housing market and to reverse the troubling rate hikes that have put affordable housing out of reach for too many," the senators added.
Why Did the Feds Raise Interest Rates?
Throughout 2022 and 2023, the Fed hiked interest rates in an effort to tame inflation, which peaked at 9.1% in June 2022. That number marked a 40-year high.
The Fed's strategy successfully cooled inflation to healthy levels. However, it also raised mortgage rates to spike past 8% in October. This led to elevated borrowing costs and record high home prices that made the housing market historically unaffordable. According to a recent report from the Harvard Joint Center for Housing Studies, 22.4 million renter households, or half of all renters in the country, spend 30% of their income on rent and utilities.
The Fed in December indicated plans to impose three rate cuts this year as inflation cools. It is unclear when the cuts will come, but the agency has paused rate hikes late last year, paving the way for mortgage rates to drop to 6.69% as of the week ending Jan. 25, per Freddie Mac.
READ NEXT: Mortgage Rate May Drop Below 6% This Year: Fannie Mae
