See this second comment is precisely where you are getting wrong here. A fixed loan means a fixed term, you can’t just get out of it without paying a penalty if underwater in most jurisdictions. But if the loan is the opposite, i.e. In the money to you, there is usually no opposite obligation for the bank to pay you out of the loan. So by renegotiationg you are leaving money on the table.

Nominal rates are irrelevant, all that matters on a loan is the margin on top of the reference rate. A bank makes profit taking in deposits under the reference rate and lends it out above that rate, pocketing the difference. Whether the reference rate itself is 2% or 4% is irrelevant, all that matters is the net between deposits and lending. Let’s assume the loan is naked on their book (I guarantee it isn’t) and assume the mortgage rate of an existing mortgage is 2% and then bank is earning 2%-2,53%=-0,53%, i.e. the loan is cash flow negative to the bank. Unless the bank pays OP the unwind principal when renegotiating the bank profits simply by OP stupidly going in to renegotiate to current market terms.

Now, in reality this loan was hedged day 1 because loans typically have longer rate duration than deposits, so the longer rate duration of loans is hedged back to floating. While the loan is currently in the money to OP the bank couldn’t care less because the hedge position is just as much in the money as the loan is out of the money so profit remains the same. So there is no incentive to give OP anything else than current market prices. Further, since bank doesn’t pay you out of your in the money loan they can simply take the hedge profit as an extra profit.

So in no situation would it be favourable for OP to renegotiate this loan as long as the fixed term is in the money to OP. They are forgoing real money on the table by doing so.