U.S. Markets open in 2 hrs 45 mins
  • S&P Futures

    -13.50 (-0.29%)
  • Dow Futures

    -95.00 (-0.27%)
  • Nasdaq Futures

    -63.50 (-0.39%)
  • Russell 2000 Futures

    -10.90 (-0.48%)
  • Crude Oil

    -0.38 (-0.53%)
  • Gold

    -2.30 (-0.13%)
  • Silver

    -0.14 (-0.63%)

    -0.0019 (-0.1699%)
  • 10-Yr Bond

    0.0000 (0.00%)
  • Vix

    -1.31 (-5.98%)

    -0.0016 (-0.1174%)

    -0.2180 (-0.1917%)

    +185.28 (+0.38%)
  • CMC Crypto 200

    -19.73 (-1.51%)
  • FTSE 100

    -13.23 (-0.18%)
  • Nikkei 225

    -135.15 (-0.47%)

Rising Mortgage Rates to Hurt Mortgage Lenders' Fee Income

  • Oops!
    Something went wrong.
    Please try again later.
·2 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Mortgage rates, which hit record-lows last year, have crossed 3% for the first time since the outbreak of the coronavirus. Mortgage rates saw their highest jump last week since the start of the pandemic, following the surge in treasury yields amid expectations of an accelerated economic recovery on the back of the extensive vaccination drive, additional government spending and a rise in inflation expectations.

In 2020, the mortgage business witnessed a boom on the back of record-low interest rates. Both mortgage origination and refinancing activities improved drastically.

Driven by historically-low rates, prospective home-buyers started coming out and entered the housing market. Also, homeowners, who had taken loans at higher rates, refinanced them at lower rates.

Thus, companies with mortgage operations, including banks with mortgage-lending businesses received substantial top-line support from an improvement in mortgage revenues in 2020.

Notably, for JPMorgan JPM, its mortgage fees and related income rose 51.8% year over year. Similarly, Wells Fargo WFC recorded an 82% increase in net gain on mortgage loan origination/sales activities during last year.

Hilltop Holdings’ HTH mortgage origination segment witnessed a 47.4% year-over-year rise in loan origination volumes. Refinancing activities increased significantly in the year compared with 2019.

However, now, with mortgage rates rising at high speed, the mortgage business might not perform as well as it did last year.

Notably, with the expectation of a speedy economic recovery, treasury yields are expected to rise further as investors have been dumping government bonds of late. And mortgage rates, which move in sync with treasury rates, might keep increasing during the year, making mortgages more expensive.

Therefore, originations and refinancing activities are likely to normalize in the quarters ahead. Banks with mortgage businesses are likely to witness a decline in mortgage-banking fees. Thus, banks’ fee income, which got substantial support from mortgage operations, will likely be hurt to some extent this year.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
Wells Fargo & Company (WFC) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research