Mortgage margins have narrowed steadily after reaching a peak in April 2020. A majority of mortgage lenders now expect profit margins to decline in the months ahead, with data from Fannie Mae’s Q1 2021 Mortgage Lender Sentiment Survey noting spreads had compressed well below the prior decade’s average.
Increasing competition may be the primary reason for lower profit margins. Respondents of the survey also said that a market shift from refinance to purchase may be the second biggest reason for margin compression — a first since Q4 2019.
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