Understood, but they've got all the leverage, unfortunately. In countries like Australia, it's essentially impossible to get a fixed rate mortgage (for the life of the mortgage), when it would probably has been a great deal a few years ago; banks have all the leverage to dictate the terms.
With variable-rate mortgages, banks can insulate themselves from inflation risks, which they themselves create.
Popular discontent and laws really would be the only way
the ability for capital markets to buy mortgages is one of the reasons the USA has 30 year fixed and australia does not (not the only reason).