In a letter addressed to Federal Reserve Chair Jerome Powell, Senator Elizabeth Warren expressed deep concern over the rising mortgage rates and its impact on the ongoing housing affordability crisis in America. Sharing the letter exclusively with CNN on Sunday, Warren urged the Fed to consider cutting borrowing costs to alleviate the worsening situation.

The letter, co-signed by Democratic Senators John Hickenlooper, Jacky Rosen, and Sheldon Whitehouse, highlighted the negative consequences of the "astronomical" mortgage rates, which have made affordable housing increasingly out of reach for many Americans. The senators appealed to Powell and his colleagues to reconsider their interest rate decisions and reverse the rate hikes that have exacerbated the crisis.

The Federal Reserve's efforts to combat inflation through aggressive interest rate hikes, the fastest pace since the early 1980s, have had unintended consequences in the housing market. Last fall, mortgage rates soared to nearly 8%, intensifying the challenge of record-high home prices in the market. The Senate Democrats stated that these high interest rates have worsened the country's housing access and affordability crisis.

A spokesperson for the Federal Reserve confirmed that they have received the letter and intend to respond. The Fed will begin a two-day meeting on Tuesday, their first of 2024, during which officials are expected to discuss when to initiate interest rate cuts.

Warren and her fellow senators acknowledged that the Federal Reserve's decision to pause rate hikes late last year was a "welcome first step," as it paved the way for a drop in mortgage rates, providing some relief to homeowners. However, they emphasized that interest rates are still too high for many American families struggling to pay rent or purchase their first homes. As of January 25, the 30-year fixed-rate mortgage averaged 6.69%.

The senators argued that the tough measures taken by the Federal Reserve have worsened the shortage of available homes in two significant ways. Firstly, high borrowing costs have deterred developers from constructing new homes, exacerbating the supply shortage. Secondly, existing homeowners with low mortgage rates are reluctant to sell their properties, as they would face significantly higher rates when obtaining a new mortgage.

This sentiment echoes the concerns expressed by housing industry groups, including the National Association of Home Builders, Mortgage Bankers Association, and the National Association of Realtors, in a letter sent to Powell last October. The groups expressed "profound concern" that uncertainty over the Federal Reserve's policies has contributed to rate hikes and volatility, further exacerbating housing affordability issues.

Warren and her colleagues warned that the Federal Reserve's policies could be widening the gap between homeowners and those struggling to find affordable housing. They noted that the burden of the affordability crisis falls disproportionately on Black and Hispanic households, whose homeownership rates significantly lag behind those of White households. Additionally, the senators cautioned that high borrowing costs have also spilled over into the rental market, increasing construction costs and the number of renters.

While some Wall Street banks and leading economists suggest the possibility of the Federal Reserve cutting interest rates in the coming months, nothing has been confirmed. Richmond Fed President Tom Barkin, in a recent CNN interview, did not rule out a potential rate cut in March but expressed a desire to observe convincing signs of inflation returning to the Fed's target.

The expectation of rate cuts has already had a positive impact on the stock market, with a surge in recent months. Investors have priced in a roughly 50% chance of a rate cut in March, according to the CME FedWatch Tool. The senators highlighted that the Fed has already indicated its willingness to cut rates, and they believe that working families struggling with the high cost of housing need relief immediately.

As the Federal Reserve's meeting commences this week, the nation waits to see how they will address the concerns raised by lawmakers and housing industry experts regarding the housing affordability crisis.