We're told there's a "credit crunch", that banks are afraid to lend money because they're afraid of defaulting borrowers. In such conditions, the loans that are actually made would have relatively high interest rates, since when risk to the lender is high, or perceived as high, then the interest rate goes up, reflecting a 'risk premium' demanded by the lender. But I just refinanced my home mortgage at 5% for a fixed-rate 30-year loan: a very low interest rate relative to recent history. That looks like free-flowing money to me . . . so why is the bank willing to lend to me at such a low rate during a "credit crunch"?
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