If interest rates -- the cost of borrowing -- is going up for corporations and home buyers, it's also going up for banks, which means consumers with savings accounts will benefit.
For now, savings accounts pay less than 1 percent interest. But with the Fed's inflation target of 2 percent, savers lose money.
For now, banks can borrow from the Federal Reserve at near zero percent interest, or cost of funds. So they borrow from savers and the Fed at less than 1 percent, make mortgage loans at 3 percent, and the difference is profit.
If, as expected, home loans go to 4 percent, that means more profit for banks. Unless they pay more themselves to acquire funds by boosting rates paid to savers.
Economics 101 says they should. But will they?
And if they do, that means borrowing rates to consumers will go up again, so that lenders can maintain their profit margins.
And away we go.
Interest rate information, by the way, is not hard to find. Bankers regularly advertise their mortgage and savings rates. And if you want national or regional averages, and data on home sales and housing starts, check web sites run by the Mortgage Bankers Association, the National Association of Realtors, or the Commerce Department.
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