Mortgage lenders are much more optimistic these days as their profits rise and the economy improves while home prices soar.

A new survey by Freddie Mac shows that lending institutions of all sizes are optimistic about the direction of the economy, with the share of lenders who think it’s on the right track is at the highest level since the survey’s inception in the first quarter of 2014.

Lenders are less optimistic for their expectations in the growth for purchase mortgages. This area saw a huge decline that was mostly attributable to rising mortgage rates. The percentage of lenders who expect an increased demand for purchase home loans dropped to the lowest level recorded in any first quarter in the survey’s history.

Purchase mortgage demand for all loan types over the prior three months has steadily declined, when compared with Q1 2016 and Q1 2015, reaching the lowest reading for any first quarter since Q1 2014, according top Freddie Mac.

Refinance mortgage have a better outlook for the lending industry with slightly rising demand growth expectations from the prior quarter, which happened to be the survey’s worst performance.

Freddie reported that lenders continued to report modest net easing of credit standards across all loan types for the prior three months and continued to report expectations to modestly ease credit standards over the next three months, with the majority of lenders expecting their credit standards to stay about the same.

Profit margin expectations went up a tad 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.”

Dunvcan added, “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.”

Erik Sandstrom
LoanSafe's Mortgage Expert
I'm a Senior Loan Officer and LoanSafe mortgage expert. If you need a live rate quote, or need help getting a new mortgage, please call me direct anytime at 619-379-8999.