Higher US rates may hit banks: S&P

In a note released on Friday, the rating agency said that since the credit crisis, low interest rates and government programs have helped to substantially boost mortgage volumes, particularly refinancing, in the US. 

The interest rates are poised to rise - either because of a potential hike in the Federal Reserve's federal funds target rate or the Fed's potential exit from quantitative easing - activity in the mortgage market is likely to shift, which would probably mean mortgage banking revenue will continue to decline for US banks. 

"It's tough to say how much of a hit mortgage banking revenues will take if borrowing costs rise. While a look back at past periods of rising rates can indicate where borrower activity might be headed, the current level of government intervention in the market is largely unprecedented following the bursting of the recent mortgage bubble. We expect a slowdown in mortgage banking or a rise in interest rates in general to have a limited overall impact on bank ratings."