Ber­nanke blames banks for hold­ing back hous­ing mar­ket

The Pak Banker - - Front Page -


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.

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