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Senators press Powell on housing affordability, insurance costs and climate risks to mortgages
Summary
Senators raised concerns about rising housing costs, higher home‑insurance rates and the long‑run financial stability effects of climate‑related losses; Powell said the Fed sees risks where insurance and banks may withdraw from high‑risk areas and that those trends could reduce homeownership and market liquidity.
Senators asked Federal Reserve Chair Jerome H. Powell about the interaction between housing affordability, rising home‑insurance costs and climate risks and the consequences for financial stability.
Sen. Tina Smith pressed Powell on dramatic increases in homeowners insurance in some states — "families, seniors are struggling to manage a nearly 40% increase in home insurance rates" in Minnesota, she said — and cited research estimating large drops in property values if climate risks are unpriced. Powell responded that the Fed does not regulate insurance companies but observed that both banks and insurers are "pulling out of areas, coastal areas and things like that, or areas where there are a lot of fires." He warned that could lead to regions where "you can't get a mortgage" or where banks will not have branches or ATMs.
Powell said those developments would not necessarily be a purely financial stability problem today but could have substantial economic consequences for homeowners, renters and state and local governments that may intervene to maintain insurance availability. Senators from both parties raised housing supply and affordability as central to long‑term policy work and asked for Fed research to inform those debates.
Senators also discussed mortgage rate drivers, noting that long‑term rates reflect term premium and broader market forces beyond the Fed's short‑term policy rate.•
