Lenders are still anticipating a shift in mortgage lending from refinancing to less profitable purchase loans, but it may not be as sudden as had been previously anticipated.

That’s according to Fannie Mae’s quarterly survey of senior mortgage executives, which found listing shortages and affordability issues have dimmed the immediate the prospects of a boom in purchase lending, while conditions for refinancing haven’t deteriorated as rapidly as expected.

“Mortgage lenders appear to have adopted a more neutral posture,” said Fannie Mae Deputy Chief Economist Mark Palim in a statement accompanying the release of the survey.

During the third quarter, Palim said, “more lenders than not reported expectations that purchase mortgage demand will continue to grow, though the total share expecting such growth fell substantially compared to the previous quarter.”

Source: Fannie Mae Lender Sentiment Survey, Q3 2021.

While 34 percent of mortgage executives polled in August said they do expect demand for purchase loans to grow over the next three months, that’s down from over 60 percent in the previous survey in May. While demand for purchase loans is seasonal, the “net share” of lenders expecting purchase demand to grow hit 14 percent, the lowest third quarter reading in the last two years.

Among lenders who expect purchase mortgage demand to decrease in the coming months, “high home prices and a limited supply of homes for sale were the primary reasons given,” Palim said. That jibes with sentiments expressed by would-be homebuyers in Fannie Mae’s latest National Housing Survey, which found 63 percent of consumers think it’s a “bad time to buy a home.”

In the mean time, demand for refinancing has stayed stronger than many expected. Interest rates have largely staying in neutral as the Federal Reserve holds off on tapering its support for the economy until there’s more certainty that the recovery from the pandemic is on solid ground.

Although most mortgage executives still expect demand for refinancing will wane, their outlook for future refi demand was more optimistic than when they were last surveyed in May.

Other highlights from the survey:

  • Lender sentiment toward the U.S. economy turned “significantly more negative” compared to the second quarter, although a majority of lenders continued to believe that the economy is “on the right track.”
  • The net share of lenders reporting easing credit standards over the prior three months ticked up for loans eligible for purchase or guarantee by Fannie Mae and Freddie Mac, but down for non-eligible loans
  • 46 percent of mortgage lenders said they expect profit margins will decrease in the next three months, an improvement from 69 percent in the prior quarter.
  • Among lenders who foresee increased profitability, Fannie and Freddie’s pricing and policies were the top reason cited

Fannie and Freddie’s federal regulator recently eliminated a 50-basis point refinancing fee instituted last year to help the mortgage giants cover anticipated pandemic losses, and a smaller, 10-basis point guarantee fee is set to expire on Oct. 1.

“Lenders continue to overwhelmingly cite increased competition as their primary concern regarding future profitability, [but] the share citing personnel costs for their diminished profit margin outlook increased significantly, suggesting that mortgage lenders’ ability to efficiently manage their workforces will be critical to their bottom lines as competitive pressures remain intense,” Palim said.

Email Matt Carter

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription