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If banks make money off the interest rate spread, how does the absolute level of rates matter (outside of misjudged future rising rates)?
by forgetsusername 10y ago
If banks make money off the interest rate spread, how does the absolute level of rates matter (outside of misjudged future rising rates)?
- TheSpiceIsLife 10y agoI think it goes something like this: Low interest rates cause debt inflation. People can borrow increasingly more as rates go down. As rates go down, the spread doesn't change, but the value of the loans increases. Maybe someone more knowledgeable can fix me up here.
- mathattack 10y agoThey don't. And they borrow from each other at "Libor Plus" which is a variable rate. (Libor is variable)