Many consumers shut out in era of cheap money

Fixed-rate mortgages have been at all-time lows for nearly six weeks, increasing homebuyers’ purchasing power and helping to trim homeowners’ monthly mortgage payments-at least for those who qualify.

An increasing number of homebuyers and refinancers say they are shut out of the cheaper borrowing conditions due to banks’ tightened lending standards, according to new data released last week by the Federal Reserve.

“While low rates are supposed to encourage Americans to take more risks, ordinary Americans have been unwilling or unable to take advantage of them,” The New York Times notes in a recent article.

Many policy makers say a housing recovery will be put on hold until banks start lending more.

“The real problem is that relatively few borrowers meet the tougher standards of today even if they could benefit from refinancing, and that is the frustration,” Guy Cecala, publisher of Inside Mortgage Finance, told The New York Times.

Cecala says that in 2003 there was nearly $4 trillion in mortgage originations (which includes home purchases and refinancing activity). However, in 2011, despite the lower mortgage rates, total originations were $1.4 trillion.