Why are some banks at risk for having large portfolios of low interest rate mortgages?
In: 66
Decades of Low interest rates combined with record high housing costs and deregulation have lead to banks selling mortgages to a lot of families that honestly should never have qualified for a mortgage in the first place.
Those types of loans are higher risk and don’t pay off that well, so banks do whatever they can to either get rid of them as bonds, or take risks in other areas to make more money.
People who are not financially savvy get mortgages with payments that are near the limit of what the can afford per month.
As interest rates and cost of living increases, people are at higher risk of default (not being able to pay their mortgages).
If this happens en-mass (like it did in 2009) then those banks could fail.
Latest Answers