Bernanke blames banks for holding back housing market
US central bank chief Ben Bernanke has said that the overly stringent lending requirements of banks are hurting the US housing recovery. In a speech, he said the housing market showed signs of recovery but was "far from being out of the woods".
The Federal Reserve chairman said "the pendulum has swung too far" from the easy lending days of the housing boom. While mortgage interest rates have fallen to record lows, he said many borrowers, especially minorities and low earners, could not get a loan.
Mr Bernanke was addressing a summit in Atlanta held by Operation Hope, a charity that provides financial advice to American citizens on middle and low incomes.
The Fed has been actively supporting the housing market since September, by restarting its policy of buying up mortgage debts. It has helped to push long-term average mortgage interest rates down to new lows, setting a record of 3.34% for a 30-year fixed rate on Wednesday.
However, Mr Bernanke complained that "overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the recovery".
The housing sector traditionally leads recoveries in the US economy following recessions, and the weakness of the housing market is a major reason why the recovery has been so sluggish this time around, prompting the Fed chairman to dub it "the missing piston".
The low interest rates have prompted an increase in borrowers refinancing their existing mortgages. However, those able to take advantage of the lower interest rates have been wealthier or higher income earning Americans who are considered more creditworthy by the banks, and who have a lower propensity to spend the extra income they save on mortgage interest payments.