1 Mortgage-Rate Chart That Makes Bankers Drool

Interest rates are rising, and mortgage rates have gone along for the ride. According to Freddie Mac, for the week of July 12, 2012, the average rate on a U.S. 30-year fixed-rate mortgage was 3.56%. Freddie's report for this past week showed that the rate had jumped to 4.51%.

Earnings reports from Wells Fargo  (NYSE: WFC  )  and JPMorgan Chase  (NYSE: JPM  ) on Friday visibly showed the downside of the rising-rate environment. As rates rise, the refinancing boom has slowed, and that's damping the mortgage-origination fees that these mortgage giants collect. At the same time, rising rates are hurting the banks' securities portfolios. During the first quarter, on a pre-tax basis, Wells Fargo had north of $6 billion in unrealized investment losses.

But it's not all bad news. In recent quarters, a pain point for banks has been declining net interest margins -- i.e., the spread between loan income and borrowing costs that they keep as profit. As rates rise, that could start to reverse. And if we see a continuation of the following chart, it could reverse dramatically.

In this chart you can identify the 30-year fixed mortgage-rate line by looking for the one that's spiking dramatically. The other two lines represent changes in the rates paid on money market accounts and five-year CDs. What we're seeing is mortgage rates jumping while the rates paid out remain relatively flat. That suggests the potential for a big jump in spread income.

And while many of us may think of banking deposits as interest-free checking accounts that cost a bank nothing (in interest at least), banks are heavily funded by interest-bearing accounts such as money markets and CDs. At the end of last quarter, Bank of America  (NYSE: BAC  ) , for instance, had $662 billion in interest-bearing deposits -- largely money market type accounts -- versus $358 billion in non-interest-bearing deposits. At US Bancorp  (NYSE: USB  ) , it breaks down to $149 billion interest-bearing and $68 billion non-interest-bearing.

To be sure, the rising rate environment will continue to present challenges, but if you're a banker, or a bank investor, this is the kind of thing that should make you smile.

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