As rates go up, those mortgages will become less valuable (because they pay a lower interest rate than new loans will). At the same time, rates going up means t

As rates go up, those mortgages will become less valuable (because they pay a lower interest rate than new loans will). At the same time, rates going up means the bank is going to have to pay more in interest to depositors, meaning they will need to offload assets to maintain their margin requirements. This is why commercial banks tend to not hold on to the loans they originate any more, and instead sell them to funds. There is correlated risks for the banks, where their assets become less valuable at the exact time they need to sell them. Banks don’t like to hold mortgages for this reason.