Thrifts face significant interest rate risk because their primary loans are mortgages and their primary sources of funds are deposits.

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Thrifts, such as savings and loan associations, primarily provide mortgages funded by customer deposits. Since the interest rates on these long-term mortgages are fixed but the rates on deposits can fluctuate, thrifts are exposed to significant interest rate risk if rates on deposits increase.

Thrifts Face Significant Interest Rate Risk Because Their Primary Loans