With mortgage rates expected to increase and refinancing activity expected to decline in the near term, most mortgage lenders expect profits to decrease, Fannie Mae reports in its quarterly Mortgage Lender Sentiment Survey.
According to the survey, 75% of mortgage lenders think profit margins will drop in the next three months, up from 65% in the previous quarter, while 17% say profits will remain the same and 9% believe profits will increase.
Mortgage lenders, Fannie Mae reported, are also pessimistic about the economy, with 59% saying it’s on the wrong track, up from 29% during the first quarter of 2021.
“For the sixth consecutive quarter, mortgage lenders expressed bearishness about near-term profit margin expectations amid headwinds from declining refinance activity, slower purchase mortgage demand growth, and narrowing spreads,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist. “For consumers, rising interest rates, lack of supply, and strong home price appreciation have reduced refinance activity and further constrained home purchase affordability, which, of course, is dampening lenders’ expectations of future business activity.”
Two hundred executives representing 188 banks and financial institutions across the country completed the survey, Fannie Mae said.
A majority of those surveyed, 61%, expect housing prices to increase during the next 12 months, while 27% expect them to remain the same and 10% believe they will decline, Fannie Mae’s survey reported.
More lenders this quarter reported reduced consumer demand for mortgages — much of it due to high housing prices and a lack of inventory — over the previous three months as well as a decline in people seeking to refinance their mortgage, Fannie Mae said.
You can read the full report here.
