That's what would happen if the rates were to float without a central bank. Banks wouldn't have infinite printed currency to borrow from the fed and then pass on to home buyers via loans. Instead banks would need to operate as they would in a free market: use borrower deposits as the basis for loans. However, as you know banks operate via fractional reserve thanks to infinite central bank currency and most people are jacked to the tits on debt without savings Therefore, there aren't enough deposits. How do you attract deposits? You increase your interest rates for account holders.
No force necessary. Just how free market banking works, and how it used to work before the socialist concept of central banking. It completely changes the incentives. Banks also have to manage their risk because no central bank will bail them out if they make bad loans.
That's what would happen if the rates were to float without a central bank. Banks wouldn't have infinite printed currency to borrow from the fed and then pass on to home buyers via loans. Instead banks would need to operate as they would in a free market: use borrower deposits as the basis for loans. However, as you know banks operate via fractional reserve thanks to infinite central bank currency and most people are jacked to the tits on debt without savings Therefore, there aren't enough deposits. How do you attract deposits? You increase your interest rates for account holders.
No force necessary. Just how free market banking works, and how it used to work before the socialist concept of central banking. It completely changes the incentives. Banks also have to manage their risk because no central bank will bail them out if they make bad loans.