We're coming off a banner year for housing -- especially mortgage lenders. Refinancing hit record-setting levels in 2020, and by the third quarter, some lenders were making a whopping $5,535 per loan -- up nearly $1,000 from the year prior.
It seems those days are numbered, though. According to the latest Mortgage Lender Sentiment Survey from Fannie Mae (OTCMKTS: FNMA), lenders expect profits to drop in the next few months. Only a mere 15% think profits will increase.
What changed? And how will these dwindling profits impact real estate investors? Let's take a look.
What lenders are expecting
The data shows 52% of mortgage lenders think their profit margins will decrease in the second quarter of the year -- up from 48% the previous quarter and a record high for Fannie Mae's survey.
Here's how Doug Duncan, senior vice president and chief economist at Fannie Mae, explained it: "Despite continued strong expectations for purchase mortgage demand moving forward, many lenders are signaling caution about their profitability and market competitiveness. This quarter, the largest net percentage of lenders in the survey history are expecting a decrease in their profit margin outlook."
The reasons for these projected drops varied, but most lenders cited either competition from other lenders or a general shift from refinancing to purchasing as the drivers behind these expected profit cuts. According to Duncan, the last time this sort of market shift was noted was in late 2019.