Housing groups, mortgage lenders urge Powell to halt Fed hikes

THREE major housing-industry lobby groups called on Federal Reserve chair Jerome Powell to refrain from raising interest rates any further and to pledge against selling mortgage bonds unless real estate financing stabilises.

“We urge the Fed to take these simple steps to ensure that this sector does not precipitate the hard landing the Fed has tried so hard to avoid,” the National Association of Realtors, Mortgage Bankers Association and National Association of Home Builders wrote in a letter to Powell dated Monday (Oct 9).

The trio said that “ongoing market uncertainty about the Fed’s rate path” is contributing to a widening premium of 30-year mortgage rates over benchmark 10-year Treasury yields. This spread has now reached “historically high levels”, they said.

“This has exacerbated housing affordability and created additional disruptions for a real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume.”

They urged the Fed to clearly state it is not contemplating further rate hikes, and to forswear sales of mortgage-backed securities until the rate spread normalises and housing finance has stabilised.

Fed policymakers in recent months have also come under pressure from some lawmakers to desist from their aggressive monetary tightening campaign. Powell and his colleagues have pledged to be nimble as they seek to return inflation towards their 2 per cent target. BLOOMBERG