The Rates Banks Charge vs. Their Funding Cost -- Continued

We already noticed examples where banks are charging their customers much more than their funding costs. Here's another example: the spread between the national average of rates charged for a home equity line of credit (HELOC) and 3-month LIBOR.


(Click to enlarge)

The screen shot is a bit busy, but the top pane shows the average HELOC rate, in amber, and LIBOR, in white. The spread between the two has been about constant until 2008, when it started to gap out. This can equivalently be seen in the bottom pane, which plots the difference between the two: that difference has risen steadily since late 2007, except for a brief period in 2008 due not to the generosity of banks but to a sudden spike in LIBOR.