Oh I get how they work... I still think it's nuts.
This article explains the banks' incentives.
https://open.substack.com/pub/f0xr/p/the-big-bank-lie?r=3i492j&utm_campaign=post&utm_medium=web
They aren't losing anything. Once you understand how banks actually work, a lot of other things will make more sense to you.
If you're able to buy a house at those rates, the banks are giving you an amazing opportunity to short fiat against a hard(ish) asset for 20 years.
Discussion
It is nuts, no doubt.
I must have misunderstood your point, I thought you were trying to say that the difference between the inflation rate and the mortgage interest rate means the bank is losing purchasing power by making the loan.