Lenders' Economic Optimism Reaches Survey High As Profit Outlook Remains Subdued

Mortgage lender expectations for the economy and home prices reached survey highs amid challenges to profit margins from competition and a shift toward purchase mortgages, according to Fannie Mae’s first quarter 2017 Mortgage Lender Sentiment Survey^®. Lenders from institutions of all sizes are optimistic about the direction of the economy, with the share of lenders who think that the economy is on the right track reaching the highest level since the survey’s inception in the first quarter of 2014. However, demand growth expectations for purchase mortgages declined substantially, mostly attributable to unfavorable mortgage rates. The net share of lenders expecting increased purchase mortgage demand over the next three months for conventional mortgages fell to the lowest level recorded in any first quarter in the survey’s history. For refinance mortgages, the demand growth expectations across all loan types rose slightly from the prior quarter, which had registered the survey’s worst performance. On net, mortgage lenders’ outlook for profit margins rose slightly quarter-over-quarter but remains significantly lower than this time last year.

"This quarter, lenders’ optimism toward the overall economy and home price appreciation hit survey highs, mirroring the consumer confidence seen in our February Home Price Sentiment Index,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “However, lenders’ profit margin outlook remains significantly less positive than this time last year and two years ago. Lenders cite competition from other lenders and a market shift from refinance to purchase – both of which reached survey highs – as the top reasons for the weak profit margin outlook. With mortgage rates expected to rise, we expect refinance activity will fall and purchase affordability will tighten, increasing competitive pressure in a shrinking mortgage market. Lenders may choose to adjust their production capabilities and staff resources given their profitability outlook."

On this webpage you will find a news release with highlights from the survey results, the Q1 2017 data summary highlighting key attitudinal indicators, a detailed research report, the questionnaire used for the Q1 2017 survey, and FAQs providing additional information about the survey.

Downloads and Related Links
Q1 2017 News Release
Q1 2017 Mortgage Lender Sentiment Survey Detailed Research Report (PDF)