If you view an interest rate as a price of money, then higher price equals lower demand.

Higher interest rates should lead to higher savings. Higher savings does not necessarily lead
to higher lending. Nations can and do have surplus savings (e.g. Japan). Most of the
developed world now over saves relative to bank capacity to lend. To counter-act this,
governments set negative rates to force money into risk assets (i.e. equity.)

Interest rate rises also drive up currency value making it more attractive to consume abroad-
-as prices in alternative currencies are lower relative to the local one. As such, higher
interest rates attack national consumption in a number of ways.

The demand for loans is set by the perception of risk in cash flow projects of the period
equivalent to the loan or less. People will not borrow money (especially for real estate
building or small businesses--the heart of bank lending) if they perceive there is the prospect
for losing their equity that is greater than prospective value of the investment. All this is
qualified by perceptions of short term and long term risk and opportunity.

Cash flow projects are under doubt during periods of high innovation. Other factors like
demographic changes and business cycles also factor.

No one knows if they can make money when innovation occurs prior to the loan being paid
off--better pizza ovens that cost half as much, etc. As such, demand for loans falls. When
demand falls, interest rates fall.

Governments (central banks) attempt to strike a balance by setting the cost of stable money
for banks. Banks can no longer hope to balance deposits against loans in a volatile world.

It is impossible to sufficiently reserve a modern bank with simple savings. As such, central
banks offer secure overnight funds to banks at interest rates designed to stimulate or
depress loan making motivation.