The latest Federal mortgage bond purchases are helping lenders more than homeowners in need of refinancing, according to Bloomberg News.
The Federal Reserve announced earlier this month that it will purchase $40 billion more securities every month, but so far lenders including Wells Fargo & Co. and JP Morgan Chase are benefiting from it.
Bloomberg reported that the rates for new 30-year loans have fallen by just 0.13 percent, compared with a drop of about 0.7 percent for yields on the bonds into which the loans get packaged. This usually indicates rising profits for lenders since the gap between the two, has reached a record of more than 1.7 percent.
Fed Chairman Ben Bernanke told Bloomberg that the goal of the purchases were to help boost the housing market, but it is being undercut by lenders inability to keep up with consumer demand, even as bond prices are driven up by investors.
According to Bloomberg, banks have been moving at a slow pace to lower rates after being flooded with applications to refinance mortgages this year.
"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?" Scott Simon, mortgage head at Newport Beach, California, told Bloomberg.
Analyst at Washington-based Compass Point Research & Trading LLC Kevin Barker told Bloomberg that margins on sales of mortgages, which were already elevated from the average levels this year, have widened by about 50 percent since the Federals announcement.
"It's very good to be a mortgage originator right now," he told Bloomberg.
