Plain Talk: Bankers' profits soar on backs of home buyers

[hue]

http://host.madison.com/news/opinion/column/dave_zweifel/plain-talk-bankers-profits-soar-on-backs-of-home-buyers/article_868519a4-ed56-11e1-974c-001a4bcf887a.html

Don't you just love the bankers? The worse things get, the more money they make.

We're going through a period where interest rates on mortgages are at all-time low, which is good news for folks who are in a position to buy a home, but it turns out to be even better news for the big banks making most of those loans.

That's because most of them have increased the historic spread between the interest they charge for mortgages and the interest they have to pay for their own borrowing and, of course, the now minuscule rates they pay to folks with savings accounts. As a result, according to a recent news story in the New York Times, bankers are enjoying ballooning profits from their mortgage business.

If the banks were using the formula that was in effect up until a couple of years ago, the 3.55 percent rate for a 30-year mortgage would be close to 3.05 percent. Or, they could increase the rates they pay savers by about a half percent.

The bankers, of course, defend their new practice.
"There is a much higher cost to originating mortgages relative to a few years ago," Jay Brinkmann, the chief executive of the Mortgage Bankers Association, told the Times.