Letter: Institutions can entice borrowers to start saving more

Published: Saturday, Oct. 6 2012 12:00 a.m. MDT

 (Michael Brandy, Deseret News) (Michael Brandy, Deseret News)

Financial institutions derive their profit based on the "spread" (usually about 4 percent) between what they can loan money for and what they have to pay in interest on savings. In our society, as these institutions compete to satisfy society's "thirst" for borrowing, the "spread" kills the ability of savers to earn any interest on their savings.

If loan rates were to jump to say 10 percent, institutions, in theory, could pay 6 percent out in interest, without hurting their bottom line. This might help borrowers think twice about going into debt and maybe even entice them to start saving more.

Jeff Porter


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