Friday, December 18, 2015

Banks take advantage of interest rate hike to raise borrowing costs without upping interest to depositors

Almost immediately after the Federal Reserve raised the discount rate from near zero to .25%, banks began to raise the cost of borrowing for mortgages, credit cards, and other loans.  In particular, Wells Fargo, PNC, and JP Morgan banks raised their prime borrowing rates to 3.5% less than five minutes after Chairman Yellen’s announcement.
But while the cost of borrowing from banks is increasing, the opposite end appears not to be, and that is interest paid to depositors from which banks use in their lending to make profits at that prime plus rate.


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