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[andromedaaudio]

Now i have a question for you ?

The Fed and the ECB kept rates at 0 for more then 10 years resulting in extremely low borrowing costs for Banks.
And the possibility for them to sell ultra low rate 10 30 year fixed mortgages.
Now fed rates are around 4 % .
How will the banking sector survive this ?

 

[Billgates307]

Now i have a question for you ?

The Fed and the ECB kept rates at 0 for more then 10 years resulting in extremely low borrowing costs for Banks.
And the possibility for them to sell ultra low rate 10 30 year fixed mortgages.
Now fed rates are around 4 % .
How will the backing sector survive this ?

You’re right. A decade of zero rates created deep structural distortions.
When the Fed hiked to 4%, banks suddenly faced a duration mismatch: they’re holding long-term assets earning 2/3% while paying more on deposits and funding. That’s what caused the regional bank stress in 2023 (SVB, First Republic, etc.).
So far, large banks are surviving because deposit costs remain “sticky” (retail clients still accept 1/2%), and the Fed provided liquidity backstops like the BTFP to prevent forced selling. As Quantitative Tightening slows and rate cuts loom for 2026, the pressure should ease further.
Smaller banks will struggle the most but overall, the system isn’t collapsing, just adapting to a more normal rate environment with slimmer margins and heavier oversight.