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Are banks really making less profit when interest rates are low? 
I've read this claim many times in the news: banks are making less profit from the lending business when interest rates are historically low. The issue with most loans is they can be satisfied at any time.  When you have falling interest rates it means most of the banks loans are refinanced from nice high rates to current market low interest rates which can significantly reduce the expected return on past loans.  The bank gets the money back when it wants it the least because it can only re-lend the money at the current market (lower) interest rates.  When interest rates are increasing refinance and early repayment activity reduces significantly. It's important to look at the loan from the point of view of the bank, a bank must first issue out the entire principal amount.  On a 60 month loan the lender has not received payments sufficient to satisfy the principal until around 50th or 55th month depending on the interest rate.  If the bank receives payment of the outstanding amount on month 30 the expected return on that loan is reduced significantly. Consider a $10,000, 60 month loan at 5% apr.  The bank is expected to receive $11,322 in total for interest income of $1,322.  If the loan is repaid on month 30, the total interest is about $972.  That's a 26% reduction of expected interest income, and the money received can only be re-lent for yet a lower interest rate. Add to this the tricky accounting of holding a loan, which is really a discounted bond, which is an asset, on the books and profitability of lending while interest rates are falling gets really funky. And this doesn't even examine default risk/cost.