Rising benchmark interest rates in the United States are having little impact on mortgage and saving interest rates as well as interest margin of banks

The Federal Reserve increased the target for the bank’s benchmark rate by 0.25% (to a range of 2.25% to 2.5%) at the end of December, the ninth rate rise since 2015. Rising benchmark interest rates are having little impact on mortgage and saving rates or interest margin of banks.

Interest Margin of Banks in the United States stood at 3.33% at the end of Q3 2018, up just 0.03% from Q2 2018 (3.3%) and up just 0.18% from Q3 2017 (3.15%).

US banks net interest margin January 2019

Mortgages rates are little impact from rising benchmark rates,

US mortgage rates vs benchmark interest rates January 2019

 

Saving interest rates aren’t rising in line with rising benchmark interest rates either,

US saving rates vs benchmark interest rates January 2019

 

Since the financial crisis of 2008-2009 the difference between bank deposit growth and bank loan growth in the U.S. diverged in a big way, graph below,

US banks loans vs deposits January 2019

Banks don’t need the savings and can’t find enough customers to lend money. Don’t expect better returns on savings, which would only mean the flight of money to riskier assets could continue.

 

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