Historically low interest rates have helped the U.S. housing market recover by attracting new buyers into the market and allowing current homeowners to refinance their mortgages at a lower rate and save money. The Federal Reserve has kept short-term overnight lending rates near zero since 2008 to encourage consumer and business spending.

Economic growth has yet to return to its pre-recession levels and the latest GDP report showed that the economy grew at an annual rate of 0.4% in the fourth quarter of last year. The Commerce Department will release its first reading of Q1 GDP on April 26.

Related: Bernanke Is One of the Most Consequential Central Bankers of All Time: Neil Irwin

Homeowners are not the only group that have benefited from the mortgage-refinancing trend. The nation’s largest banks have seen their mortgage businesses skyrocket as more Americans took advantage of super low interest rates. But recent reports by JPMorgan (JPM) and Wells Fargo (WFC) indicate that the rush to refinance may be slowing and the lucrative profits earned in recent years could be falling.

[Click here to check home loan rates in your area.]

Wells Fargo, the nation’s largest home lender, said the volume of its mortgage applications fell 25% in the January to March quarter versus the same quarter in 2012. It also acknowledged that its margins for originating and selling home loans would likely be squeezed in future quarters. JPMorgan revealed that its mortgage applications fell 8% last quarter, leading to a drop in mortgage banking income.

Related: Sheila Bair on Why the “Vampire Squid” is NOT Too Big To Fail

Sheila Bair, the former FDIC chair and senior advisor to the Pew Charitable Trusts, says in an interview with The Daily Ticker that the low interest rate strategy promoted by the Fed to goose the economy is backfiring.

“The Fed has got the best of intentions…but it’s counterintuitive,” she argues. “Low rates dampen the incentives to invest.”

The Fed’s monetary policies have made it more difficult for banks to generate revenue, forcing them to seek profits in other ways, she notes.

Related: The Real Reason the U.S. Economy Won’t Take Off

“It’s very difficult to make a loan of a multi-year duration because you have this very low interest rate on your balance sheet,” Bair explains. “That’s not good for business lending. Banks can make money in other ways – trading profits, investment banking fees, deposit accounts – other ways…that don’t necessarily help the economy.”

Business lending, not home refinancing, holds the key to the economic recovery, according to Bair. The U.S. needs to shift its economic priorities if a full recovery is to happen, Bair adds.