WASHINGTON – Yesterday, U.S. Senators John Hickenlooper, Elizabeth Warren, Jacky Rosen, and Sheldon Whitehouse sent a letter to Federal Reserve Chair Jerome Powell, calling on the Fed to reverse interest rate hikes that have raised housing costs beyond what many Americans can afford and urged the agency to reverse rate hikes to the federal funds rate in 2024.
“The Fed’s decision to raise interest rates rapidly, and keep them high, has resulted in higher costs for home purchasers, higher rents, and reductions in new home and apartment building—and the job growth that comes with these investments,” wrote the senators.
In their letter, the senators note that 2023 rate hikes drove mortgage rates to the highest levels in 23 years, raising the average rate on the 30-year fixed-rate mortgage to eight percent in mid-October, from rates as low as three percent in 2021, and note that mortgage rates now sit at 7.33%—well above rates paid by homeowners over at least the past decade. These rates have significantly increased home purchasing costs for consumers: from December 2021 to December 2022, average monthly payments on 30-year fixed-rate mortgages rose from $1,400 to $2,045–a 46% increase. Today, those payments have skyrocketed to $2,883.
“Home-ownership is a well-documented means of wealth creation… As high costs and interest rates deter prospective first-time home buyers, many families and individuals choose to stay in the rental market,” continued the senators. “In addition to keeping renters in their units and constricting the supply of new rental units by making construction more expensive, high interest rates mean higher mortgage rates for landlords, who may pass off these costs in the form of rent hikes for their tenants.”