Federal Reserve officials are becoming more concerned that the turmoil in the credit and mortgage markets will prolong the downturn in the housing sector and lead to a pullback in consumer and business spending.Frederic Mishkin, a Fed governor, said in a speech to the Money Marketeers of New York that even creditworthy borrowers are finding it more difficult to qualify for a mortgage or are paying more for the loan. "At this point, housing demand seems likely to be crimped further by a marked reduction in the availability of mortgages, and consumer and business spending also could be damped as a consequence of the recent financial turmoil," the Fed governor said. Janet Yellen, president of the San Francisco Federal Reserve Bank, also warned in a speech that the financial market turmoil "seems likely to intensify the downturn in housing." She also opined that mortgage interest rates are likely to remain relatively high for some time and that "this could prolong the adjustment in the housing sector."

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