Daily Market Update: Banks expected to increase profits from mortgages

by 10 Apr 2015
Banks expected to increase profits from mortgages
Some of America’s biggest mortgage lenders will be reporting their first quarter results starting next week and home loans are expected to be a highlight in their revenues. Banks, including JP Morgan Chase and Wells Fargo, will reveal profits Tuesday and analysts expect them to report a turnaround from a year ago when mortgage business was slow.
For the first three months of this year though with low interest rates driving new business Paul Miller, an equity research analyst at FBR Capital Markets told Reuters that he believes many will be surprised at how strong the mortgage element of banking has been. This time last year there was a near 40 per cent reduction in mortgage volume.

Higher interest rates can be good for the housing market says economist

As the U.S. housing market (not to mention the rest of the world) awaits the Fed’s first increase of interest rates an economist says higher rates would benefit the real estate industry. Mark Fleming, chief economist at First American, says that conventional wisdom that higher interest rates equal bad news for housing may not be true.

The concerns of many are that over-stretched borrowers will struggle further; that builders will slow down construction; that the cost of buying a home will further outpace wages. Fleming argues though that figures point to the housing market being at its healthiest than at any time in recent history.

Writing at Forbes.com he says that a rate increase is a signal that the wider economy is doing well with stronger employment and growth. Taking housing out of a vacuum and viewing interest rates in that wider context. He acknowledges that the housing market is likely to dip when rates rise but says that it would still be far more buoyant than last year.

City planners should consider baby boomers as well as millennials
With more people living longer and staying healthier there is a shift in the requirements of housing and cities. Recent reports show that those aged 45 and above are expecting to stay in their own homes longer than previous generations, even if they need the support of carers. In the next 30 years there will be 50%  more over-65s according to the U.S. census.

An AARP survey found that the ageing population wants to live in single-lot homes with an upstairs bedroom; the traditional retirement home model is less attractive to this well-educated and largely fit generation. In a Detroit Free Press article, Richard Carlisle of planning form Carlisle/Wortman Associates highlights that homes are only part of the equation; towns and cities need to be planned for this generation alongside the needs of the millennials.

It will likely mean more flexible zoning for homes and amenities. Better provision of public transportation and adult engagement areas in public parks. It may sound a long way off but as Mr Carlisle writes: “The 16 years between now and 2030 will go by faster than we think.”


Should CFPB have more supervision over credit agencies?