10/01/2010 05:04 pm ET Updated May 25, 2011

Cautious Homeowners Not Seduced By Record-Low Interest Rates

There's very little anyone can do to convince Americans to take out a mortgage.

Mortgage interest rates are lower than they've been in at least 40 years -- 4.37 percent, as of September 23, according to data from the St. Louis Fed -- but by and large, no one seems to care. Sales of new homes in August were at their second lowest rate ever, Bloomberg reported last week.

"What can Dr. Bernanke do when the shift in attitudes is so profoundly psychological?" Gluskin Sheff chief economist David Rosenberg asks in his letter today (free subscription required). He points to a report in Wednesday's USA Today that says Americans are increasingly paying down mortgages instead of taking out new loans or refinancing.

According to USA Today, 30 percent of homeowners who refinanced 30-year mortgages in the second quarter of this year shortened the term of the loan to 15 or 20 years, meaning they'd have to pay it back sooner. There's also been a dramatic shift away from taking out loans against home equity (using second mortgages to get immediate cash). Freddie Mac, according to USA Today, says holders of its mortgages borrowed only $8.3 billion against their homes in the second quarter of this year, compared to $21.8 billion a year earlier. What's more, 22 percent of these people actually put money back into their equity, the third highest rate since at least 1985.

Americans are chastened, Rosenberg says, pointing to another USA Today piece that shows a broad shift in risk-taking. Fewer Americans are moving homes, and more are delaying marriage -- even as the rate of "cohabitation" of couples (oddly, only opposite-sex couples) is at an all-time high.

But despite any psychological shift, almost a third of Americans couldn't get a mortgage even if they wanted one, due to poor credit scores. Lenders now are more cautious, typically refusing mortgages to anyone with a credit score below 620. Indeed, banks are still dealing with a mess of struggling loans: lenders wrote off debt this year at a higher rate than any year since at least 1988.

The general expectation is that the Fed will engage in more quantitative easing next year. New York Fed president William Dudley dropped hints to that effect today. But, as Rosenberg says, even if that results in an even lower mortgage rate, "who cares?"