Bloomberg News

Housing May Twist in the Wind After Fed Twist: Chart of the Day

September 28, 2011

(GRAPHIC: COD_HOUSING_FED_092811. CHART OF THE DAY. Size: 2C X 4in. (96.0 mm X 101.6 mm) Expected by 15:00.)

Sept. 28 (Bloomberg) -- The Federal Reserve’s effort to reduce borrowing costs is unlikely to help the housing market enough to bolster the economy, according to Andrew Milligan, Standard Life Investments Ltd.’s head of global strategy.

“Mortgage refinancing remains little different” from last year even though the Fed’s plan to buy longer-term debt and sell shorter-term securities sent rates on home loans to record lows, Milligan wrote on Monday in a report.

The CHART OF THE DAY compares the Mortgage Bankers Association Refinancing Index with the average rate on 30-year refinancings, as compiled by The index’s reading for the week ended Sept. 16 was about the same as last November, while the 30-year rate dropped to 4.10 percent this month, the lowest in eight years of data and down from last year’s 4.75 percent average.

Fannie Mae and Freddie Mac are doing too little to aid refinancings, according to Edinburgh-based Milligan. The mortgage-finance firms have operated under U.S. conservatorship for the past three years after loan defaults pushed them close to collapse. The lack of support is among “structural impediments to the housing market” that will limit the effectiveness of the Fed’s so-called Operation Twist, he wrote.

Policy makers at the central bank decided last week to buy $400 billion of bonds maturing in six years or longer and sell the same amount of securities due in three years or less. The Operation Twist name was first used for a similar policy move half a century ago.

--Editors: Nick Baker, Joanna Ossinger

-0- Sep/28/2011 15:43 GMT

To contact the reporter on this story: David Wilson in New York at

To contact the editor responsible for this story: Nick Baker at

The Good Business Issue
blog comments powered by Disqus