As mortgage rates climb higher, the $35T of equity sitting in American homes gets harder to unlock. Yes the affordability crisis for prospective buyers gets worse, but importantly, one of the most impactful channels by which Fed easing cushions the economy is the refinance channel, and it is clogged in HISTORIC fashion. The average rate on outstanding mortgages is MORE THAN 200bps away from market rates, which presents a significant hurdle not just for new originations, but for anyone looking to tap home equity and bolster their cash levels. And the average is only just above 4% because of the past four years. A great many homeowners are sitting on rates in the 3s and high 2s, a LONG way from current rates at 6.7%. Since 30Y mortgage rates have a long term average spread to the 10Y treasury of 1.8-2%, the long end would need a MASSIVE bid to enable mortgage costs to fall anywhere close to existing homeowners' rates or else they will not be able to tap equity without paying a huge premium (and raising their note, all else equal). For 40 years the Fed was able to cut short rates to a new low vs the prior cutting cycle, which meant long end yields consistently drifted lower as well and accommodation was able to reach homeowners. Those days are over. This mechanism was clogged by the rapidity that rates were hiked in 2022 immediately following all-time low mortgage rates and one of the largest buy/refi waves in US history. The bond bull market is dead. It's hard enough for long end rates to fall much with perpetual 6%+ deficits, but imagining them below 4% seems like a universe away without a Depression level economic event whacking them down and bringing a host of other consequences. All this converges to mean the next time the Fed needs to cut rates, one of their most useful tools for helping households has been rendered impotent.(𝐓𝐗𝐌𝐂)