Thursday, December 16, 2010

Interest Rates and Competition

I shouldn't venture into this subject, but I'm confused.  If I understand, which I probably don't, the Fed continues to make money available to banks at a low cost but the mortgage rate is rising.  How does that happen? Shouldn't the banks be competing to make loans, and therefore keeping rates low?  Or is the home mortgage market subject to frictions and problems which make it not very competitive?

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