Missing link: The Fed and mortgage rates

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Fed Chairman Ben Bernanke (pictured) is a powerful man, but he cannot move many of the interest rates that matter. What’s more, he can’t make banks loan you money and he can’t convince investors that mortgage-backed securities are worth buying.

News item from today’s L.A. Times: ‘The Federal Reserve has been slashing short-term interest rates since August with precious little effect on the one that matters most to homeowners and home buyers: the 30-year fixed mortgage rate.’

More: ‘That rate is roughly where it was a year ago, while the discount rate, which is what banks pay to borrow directly from the central bank, is 4 percentage points lower.’

Think about that: the cost to banks to borrow is down 4 percentage points in a year. The cost to borrow for a 30-year fixed mortgage hasn’t moved.

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Photo credit: Bloomberg News