The Federal Reserve’s latest mortgage bond purchases so far are helping profit margins at lenders including Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM)more than homebuyers and property owners looking to refinance.
Since the Fed’s Sept. 13 announcement that it would buy $40 billion more securities per month, the rates offered for new 30-year loans have fallen by just 0.11 percentage point, compared with a drop of more than 0.6 percentage point for yields on thebonds into which the loans get packaged, according to data compiled by Bloomberg and Bankrate.com. The gap between the two, which typically signals increasing lender revenue when it widens, has reached a record of more than 1.6 percentage point.
Fed Chairman Ben S. Bernanke’s stated goal of helping boost the housing market is being undercut by lenders’ inability to keep up with consumer demand, even as investors drive up bond prices. Banks have been slow to lower rates after being overwhelmed this year by applications to refinance mortgages.
“Think about it this way: If you had a restaurant with 100 people out the door waiting in line, would lowering prices be the first thing on your mind?