counter-cyclical fluctuation of bank mortgage lending

commercial banks ,like life insurance companies are more interested in mortgage lending during certain phases of the business cycle than during others. In the upswing of the cycle,when loanable funds are scarce in relation to the demand for them,banks prefer to satisfy business borrowers first and mortgage borrowers later. But when business activity turns downward and the demand for bank loans among business men slackens off,banks exhibit much greater interest in mortgage loans. The interest-rate ceiling on government guaranteed mortgages and the relative inflexibility of mortgage rates generally affect the flow of funds into mortgages as compared with other possible earning assets. it is this "stickiness"of interest rates on mortgages that helps account both for the usual lack of interest on the parts of banks and other lenders in making mortgage loans in the upswing of the cycle,and for their greater interest in making such mortgages in the downswing.
MORTGAGE LENDING BY BANKS IN CREDIT RESTRAINT The impacts of changing monetary-credit policy by the federal reserve on commercial bank mortgage lending behavior in the latter part of the 1960's(with about a year lag)are clearly revealed in federal reserve data.In 1965,and in 1966,commercial banks increased their holdings of mortgages by $5.7 billion each year.