Tight competition makes mortgage lenders pessimistic about profits
Mortgage lenders are more pessimistic than ever about the industry's profit margin outlook, with many blaming tight competition for the negative attitudes, according to Fannie Mae.
The outlook for profit among lenders sank to its lowest level across all loan types in the fourth quarter, which include government-sponsored enterprise eligible, non-GSE eligible and government mortgages, according to Fannie's latest Mortgage Lender Sentiment Survey.
For the eighth consecutive quarter, respondents claimed competition among other lenders was the top reason for their sour sentiments.
The share of lenders who saw purchase demand growth over the previous three months dropped to its lowest fourth-quarter reading since Fannie began tracking this data in 2014, while those anticipating growth over the next three months tanked to an all-time low. Concerning refinance demand, lenders reporting growth over the past three months fell to its second lowest reading for GSE-eligible and its lowest for non-GSE eligible loans.
"Rising mortgage rates and lean inventory amid solid home price appreciation have discouraged both first-time and trade-up homebuyers," said Fannie Mae Senior Vice President and Chief Economist Doug Duncan.
"However, mortgage rates have shown signs of stabilization, and annual home price gains have slowed from the red-hot pace seen earlier this year. While 2018 is likely to end up a disappointing year for the housing and mortgage industries, continued strength in demographics and the labor market offers hope that conditions should stabilize and may even improve next year," he said.
Lenders continued to ease credit standards at a modest pace in the beginning of the year, but still at a much lower rate than a year ago. Net easing expectations for the next three months are holding fairly steady from both the previous year and quarter.