Skip to main content
Press Release

Lenders Show Signs of Optimism as Mortgage Demand Expectations Improve

March 13, 2019

Upgraded Outlook Supports Call for Stronger Spring Selling Season

Matthew Classick

202-752-3662

WASHINGTON, DC – The net profit margin outlook for mortgage lenders, while still negative, improved significantly in the first three months of 2019, due primarily to stronger demand expectations for both purchase and refinance mortgages, according to Fannie Mae's Q1 2019 Mortgage Lender Sentiment Survey®.

"Lenders appear less pessimistic regarding mortgage demand expectations; thus their profit margin outlook over the next three months is also slightly improved," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "While the results seem to portray the gloomiest picture of purchase mortgage demand during the prior three months in the survey's five-year history, the net share of lenders expecting rising demand over the next three months exceeded the level recorded in the same quarter last year. Lenders' view of the refinance market was somewhat rosier, as both recent and expected demand improved to the best showing in two years, helping to support lenders' improved profit margin outlook."

"While more lenders anticipate declining rather than rising profit margins, continuing the trend that started in the fourth quarter of 2016, the net share expecting falling profit margins decreased from a survey high in the prior quarter to the lowest share in nearly two years," continued Duncan. "Lenders' improved demand outlook going into the spring selling season bodes well for our forecast of relatively flat mortgage volume this year following the double-digit drop in 2018."

MORTGAGE LENDER SENTIMENT SURVEY HIGHLIGHTS: 

Purchase mortgage demand

  • For purchase mortgages, across all loan types (GSE eligible, non-GSE eligible, and government), the net share of lenders reporting demand growth over the prior three months remained negative and fell further to reach a new survey low. However, demand growth expectations for the next three months improved, showing a more optimistic outlook compared with one year ago.

Refinance mortgage demand

  • For refinance mortgages, while more lenders continued to report weaker refinance demand than those seeing rising demand, the net share of lenders reporting demand growth over the prior three months increased significantly to the highest level in two years across all loan types. Similarly, the net share expecting demand growth remains negative but also improved to the highest level in two years. 

Easing of credit standards

  • Overall, lenders on net continued to report easing lending standards at a modest pace across all loan types.
  • For GSE eligible loans, the share reporting easing lending standards for the prior three months was only slightly above the share reporting tightening, with the net share reporting easing lending standards reaching the lowest level in four years.

Profit margin

  • Lenders' net profit margin outlook has stayed negative for the tenth consecutive quarter, but has improved significantly from the survey low in the prior quarter (Q4 2018) and one year ago.
  • For the ninth consecutive quarter, "competition from other lenders' has continued to be cited as the top reason for lenders" decreased profit margin outlook. This quarter, "consumer demand" also continues to be the second most important reason.

The Mortgage Lender Sentiment Survey by Fannie Mae polls senior executives of its lending institution customers on a quarterly basis to assess their views and outlook across varied dimensions of the mortgage market. The Fannie Mae first quarter 2019 Mortgage Lender Sentiment Survey was conducted between February 6, 2019 and February 17, 2019 by PSB in coordination with Fannie Mae. For detailed findings from the first quarter 2019 survey, as well as survey questionnaires and other supporting documents, please visit the Fannie Mae Mortgage Lender Sentiment Survey page on fanniemae.com. Also available on the site are special topic analyses, which focus on findings and analyses of important industry topics.

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) group or survey respondents included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR group represent the views of that group or survey respondents as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/fanniemae.