Quote:
Originally Posted by klinton
yop, for me it is also strange. but what are the "normal" , walk-in mortage rates these days in US ? around 2-3 % per year ? So having it fixed for 30 years, you pay almost 5 %/ year... bank has to earn....
I wonder then if they expect rates over 5 % in next 10 years - at all, as fixed rate for 30 years is just 4,85 %.... interesting
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The banks just take out interest rate swaps (hedge against a 30yr bond) and lock in the rate going forward, with a couple of points in their favor over the length of the swap.
So they have tied in that loan for 30 years and know exactly how much money they will make. Doesn't matter if rates go up/down.