Lenders are also forecasting weak refinance mortgage demand
Mortgage lenders are pessimistic about the profit outlook for 2019 amid industry competition and expectation of weakening demand for purchase and refinance home loans.
Fannie Mae’s Mortgage Lender Sentiment Survey shows that sentiment fell in the final quarter of 2018, marking the ninth consecutive decline in the quarterly survey.
Competition from other lenders was the main reason for the negative outlook with demand from consumers second.
"Stressful conditions continue to hang over the mortgage industry. Lenders are reporting the lowest purchase mortgage demand expectations across all loans types and the worst refinance demand expectations for GSE-eligible loans in the survey's five-year history," said Doug Duncan, senior vice president and chief economist at Fannie Mae.
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 reached the lowest reading for any fourth quarter since the survey's inception in 2014, and the net share reporting growth expectations for the next three months reached an all-time survey low across all loan types.
For refinance mortgages, the net share of lenders reporting demand growth over the prior three months declined to the second lowest level in the survey history for GSE-eligible and to the lowest level in the survey history for non-GSE-eligible loans. The net shares reporting growth expectations for the next three months continued its decline, with the net share for GSE-eligible loans reaching a new survey low.
Credit standards easing
The survey found that lenders on net eased lending standards at a modest pace in Q4 2018 as they have done since the start of the year; but at a slower pace than in Q4 2017.
Duncan adds that rising mortgage rates and lean inventory amid solid home price appreciation have discouraged both first-time and trade-up homebuyers, but he has some optimism for 2019.
“Mortgage rates have shown signs of stabilization, and annual home price gains have slowed from the red-hot pace seen earlier this year,” he said. “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."
