The fed's attempts to save the housing market have come to nothing. Risk has returned with a vengence. Banks have remembered how interest rates should properly reflect default probabilities.

Feb. 29 (Bloomberg) -- Consumers like Valerie Jacobsen aren't getting much of a break on borrowing costs even after five months of interest rate cuts by the Federal Reserve. Jacobsen, 30, wants to refinance her 7.25 percent first and 8.5 percent second mortgages into one loan at a lower cost. To cut the payments enough to recoup her $3,000 in closing costs, she needs a rate well below 6 percent. She wasn't ready when costs dipped in January and now they're back at levels that make her plan too expensive, the Austin, Minnesota, resident says.

``Rates I'm seeing aren't really mimicking what the Federal Reserve is doing,'' said Jacobsen. ``I'm wondering why that is.''

Trying to spur lending and avert a recession, the Fed has chopped 2.25 percentage points off its benchmark rate since September. Wariness among lenders and fears of inflation are keeping mortgage and auto loan rates close to or above levels before the central bank began easing, while credit-card issuers are tightening their standards.

The slippage between the Fed's rate cuts and consumers' ability to borrow or reduce loan costs is weakening the central bank's ability to stimulate the biggest part of the economy, consumer spending. It accounts for more than two-thirds of goods and services output and stalled for the second consecutive month in January after adjusting for inflation, the Commerce Department said today.