Bonus points for explaining this for my country NZ – where we have a reserve bank that set the OCR.
I think(?) globally interest rates for home mortgages have risen sharply over the last year. And I get that banks have to make a profit. Our OCR has gone from around 1% to 5% while the retail banks have gone from charging 3% to 8% (roughly pocketing the 2-3% margin) BUT where does the baseline increase go? Ie OCR was 1% now 5% so who is getting that additional 4% of interest on every bodies money??
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Most mortgages in the US are purchased by Fannie Mae and Freddie Mac. They keep some of the mortgages in their portfolios, and package some into a financial product called a “mortgage backed security”.
So Fannie Mae and Freddie Mac make more money off the interest as do people investing in mortgage backed securities.
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