WASHINGTON–Mortgage lenders have begun adjusting their lending forecasts for 2017 following changes in interest rates.
Fannie Mae's fourth quarter Mortgage Lender Sentiment Survey, for instance, is showing the net share of lenders expecting demand to increase over the next three months is now at or near lows in the survey regardless of loan types. The top reason for worsening near-term outlook across all mortgage types was "Mortgage rates are not favorable," which was by two-thirds of lenders for conventional loans and slightly more than half of those for government loans – a survey high.
"The survey captured lenders' bearish sentiment driven by the recent surge in mortgage rates – a level of bearishness last seen in the summer of 2013 during the taper tantrum," said Doug Duncan, senior vice president and chief economist at Fannie Mae, in a statement. "The sudden surge in mortgage rates weighed on expected future purchase and refinance volume. Downbeat production expectations suppressed lenders' profit margin outlook to the worst showing in the survey's short history. Rates could slowly unwind in coming quarters, reversing some of the expected decline in volume. However, the potential normalization of interest rates after a sustained period of strong refinancing volumes presents the biggest business challenge facing mortgage lenders in some time."