Lenders Concerned About Profits Amid Higher Rates, Fewer Refis: Fannie Mae Survey
Originally published on March 10, 2022 by Matthew Classick for Fannie Mae.
A majority of mortgage lenders continue to expect near-term profitability to decrease amid rising mortgage rates and declining refinance activity, according to Fannie Mae's (FNMA/OTCQB) Q1 2022 Mortgage Lender Sentiment Survey® (MLSS). According to the survey, 75% of mortgage lenders believe profit margins will decrease in the next three months, up from 65% in the prior quarter, while 17% believe profits will remain the same and 9% believe profits will increase. Competition from other lenders, market trend changes, and consumer demand were the top reasons cited for the decline in profitability expectations. Mortgage lenders also grew more pessimistic about the larger economy in Q1 2022, with 59% now reporting that the economy is on the wrong track, compared to 29% in Q1 2021.
Compared to last year, across all loan types, more lenders this quarter reported reduced consumer demand over the previous three months for both purchase and refinance mortgages. Looking ahead, again across all loan types, fewer lenders than last quarter expect purchase mortgage demand to grow in the next three months, while the vast majority of lenders continue to expect to refinance demand to decrease.