"Low rates can only do so much," said Greg McBride, senior financial analyst with Bankrate.com. "Operation Twist will not prompt banks to make loans they're not comfortable making. It won't prompt people to buy houses if they're worried about a job loss, and it won't help homeowners refinance mortgages if they're already unable to qualify."
Need some evidence?
Here are some annual numbers from 2010 from "Thetruthaboutmortgages.com
"... refinance volume fell about 14 percent as compared to 2009, while the 30-year fixed hit a record low 4.17 percent.
Of course, it wasn’t for a lack of interest; it had more to do with issues holding back homeowners.
A lack of home equity, more rigorous underwriting carried out by mortgage lenders, and the presence of second mortgages all hindered refinancing.
So what is the Fed so to? Increasing the money supply has not worked, lowering interest rates has not worked (or more correctly has not worked enough), they are out of tricks up their sleeve. The country needs job growth and until wages are more competitive internationally, hands are largely tied. My guess since they must appear relevant is to somehow create incentives to make loans to lower rated borrowers. Which alas history has shown to be a road to trouble.
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