The recent increases of mortgage rates from major banks aren’t just meant to restore margin but to embellish it higher.

• Banks have been increasing their fixed mortgage rates recently, claiming that their “funding costs” are rising.
• For the major banks, current funding costs are based in the wholesale swap markets, which remain unchanged in 2017.
• The author assesses the banks’ response to the rise in wholesale swap rates by looking at the margin-to-swap on the 2 year offers.
• He shows how the early 2017 rate rises are more about restoring bank margins than actually responding to recent (non-existent) wholesale swap rate changes.

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