The survey determined that consumer demand for government-sponsored enterprise eligible and government loans fell to their lowest second-quarter reading in three years, while refinance demand also hit a depth not seen since the second quarter of 2014. The second quarter also marked the sixth consecutive quarter where "competition from other lenders" was cited as the main reason raised by lenders for their lower profit margin outlook.
"Lenders remain bearish this quarter as they continue to face headwinds from rising mortgage rates, tight supply, and strong home price appreciation, which have drastically reduced refinance activity and restrained home purchase affordability," said Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae. "These factors have combined to squeeze mortgage origination volumes and have increased competitive pressures. Increased competitiveness will likely persist as a top driver of lenders' mortgage business strategy. We expect this will prompt businesses to turn to cost-cutting as a means of managing their bottom lines, with payroll reduction likely to assume a more prominent role in future belt-tightening efforts."