3 Questions for Banks in a Permanent Low-Rate Environment
Following the Great Recession, the Federal Reserve dropped rates close to zero in 2010 to jump-start the economy. Rates stayed around this level for another roughly seven years, and in that time period, the banking industry changed.
After the fallout from the housing market during the Great Recession, banks originated fewer residential mortgages, likely due to several reasons. There were stricter underwriting standards. Millennials, saddled with debt, didn't buy homes. These loans were also less attractive to banks because they have smaller spreads than many other loan categories.
Instead, banks began to focus on the commercial sector, adding $1 trillion in commercial and industrial loan volume between 2006 and 2019, according to the FDIC, and significantly boosting commercial real estate and multi-family loan volume as well.
Source Fool.com
