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The lender has no practical alternative in most cases other than to reject business outright. The reason they go along with it mostly willingly, is the borrower
by adventured 6y ago
The lender has no practical alternative in most cases other than to reject business outright. The reason they go along with it mostly willingly, is the borrower can typically go somewhere else for the loan. The current lender would just as soon keep you as a customer at 2% (vs the old 4%) than see you go somewhere else.
They don't make up for the loss, they accept the lower rate of return vs losing the customer entirely.
- marvin 6y agoFascinating, thanks for the info. In Norway, fixed-rate mortgage agreements are always made with a clause mandating settlement of the interest difference, in the case of refinancing or early repayment. The customer therefore has no leverage over the lender by threatening to take the loan elsewhere. They'd have to pay all of the remaining interest if they wanted to settle the loan, or at best settle the interest difference if moving the loan to a lender with a different interest rate. Assuming both banks agreed to the exchange. Of course, if interest rates increase, such settlement could also favor the borrower. But that hasn't been the case in a long time. Most mortgages here are floating-rate.