One credit reporting agency thinks the tides for the mortgage industry will change for the better in 2025.
A Fitch Ratings report has upgraded its expectations for mortgage lending and servicing from "deteriorating" to "improving" in the year ahead.
The agency is forecasting rosier times based on the belief that mortgage rates will fall due to the
"Operating results should improve in 2025, with higher origination volumes and stronger gain-on-sale margins," the agency predicts.
The credit reporting agency's bullish take on the mortgage industry's future is a welcome take in an unpredictable time.
In the past month mortgage rates have barely budged. As of Nov. 27, the 30-year fixed rate mortgage was at 6.81%, slightly lower than 6.84% one-week prior,
The reelection of President Trump has created some uncertainty about how his positions on tariffs,
If interest rates do indeed go down, Fitch thinks there is ample opportunity for lenders to cash in on refinance demand. The agency points out that 74% of outstanding mortgages carry rates below 5% as of the second quarter, but that leaves a "meaningful slice" of borrowers who will be open to pull the trigger to refinance if rates fall to 6%.
Another positive note from the agency is that loan quality "remains sound" with delinquencies largely below pre-pandemic levels.
Fitch does, however, expect an economic slowdown, which may hit labor demand and slow growth in household income. Despite this, massive levels of accumulated home equity should offset any potential spikes in poor loan performance, it said.
The rating agency said shifting regulations, such as those recommended in the Financial Stability Oversight Council's May 2024 report on nonbank mortgage servicing, and related regulatory costs, are key to understanding how the mortgage industry will evolve in the year ahead.
