The LA Times has a great article about this subject:

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.

The rate for a traditional 30-year fixed-rate mortgage was 6.39% as of March 12, according to BankRate.com’s weekly national survey, compared with 6.22% a year earlier.

“The housing market was a bubble, but it created a lot of jobs and it created a lot of paper wealth,” Kasriel said. “Because the values went up, a lot of people went out and borrowed against the increased value of their houses and bought Harley Davidson motorcycles and big-screen TVs. And Wall Street thrived on this. And state and local governments thrived. It was wonderful.”

Now, he said, “everything is in reverse.”

That makes banks justifiably reluctant to lend, creating a conundrum for the Fed. Its ability to pour money into the economy is predicated on all the banks going along.

For homeowners, the news is simpler. Those who were hoping to take advantage of lower rates to refinance into long-term fixed rate loans are likely to be stymied.

CNBC also covered this story today:

Even with a three-quarter-point cut in interest rates today, homeowners shouldn’t hold their breath waiting for their mortgage rates to follow.

If recent history is any guide, the Federal Reserve’s aggressive rate-cutting will have little or no effect on long-term loans to homeowners.

In fact, mortgage rates even have bounced up a bit following some Fed cuts since September 2007.

Mortgage rates have stayed above 6 percent consistently, though they showed a sharp decline Tuesday to 5.74 percent for a 30-year fixed, perhaps in anticipation of the Fed move. Still, banks continue to tighten lending requirements, especially regarding loan to value ratio, making money hard to come by at any rate.