Banks Mortgage Company Refuses to Adjust Rate to Remain Competitive
Why would a bank or mortgage company refuse to adjust a borrowers loan to remain competitive with the going rates vs a borrower going with a different bank and then the old lender loses on the interest profit that the loan would have produced.
At first this seems like it makes sense, so why do banks not do this for customers?
- One thought is that the are taking advantage of customers and that they will not refinance.
- The mortgage bank believes it can continue to take profit from the higher interest loans.
Basically the bank hedges its bet that customers will not refinance a loan. The profit to a bank on a mortgage that reduces from 3.5% to 3% over 30 years on $500,000 principal can be several hundred thousand dollars, that’s a significant amount of money that the bank stands to make.
And then there’s the practice of banks packaging so called “low profit” loans and selling the off. Banks are looking to maximize profits and reduce risks.
It pays to refi if rates drop and you can qualify. Look for low or no cost loans, usually no points, stay away form ARMs which auto adjust and can leave you exposed paying higher rates.