Strong consumer demand, particularly among purchase mortgages, continued to buoy lenders’ overall expected profitability, according to Fannie Mae’s Q4 2019 Mortgage Lender Sentiment Survey, even as lenders expect refinance demand to soften amid a more stable interest rate environment.

Most mortgage lenders responding to Fannie Mae’s quarterly sentiment survey expect profit margins to rise or remain the same.

According to the survey, 44 percent of lenders believe profit margins will remain about the same compared to the prior quarter, while 28 percent believe profits will fall and 27 percent believe profits will rise.

“Mortgage lenders’ profit margin outlook remains steady following gains in the first three quarters of 2019,” Fannie Mae Senior Vice President and Chief Economist Doug Duncan said in a statement. “Credit standard trends also continue to hold steady amid the largely unchanged profitability outlook. Lower interest rates, which drove the refinance boom, have been the engine driving mortgage demand growth this year. Lenders’ purchase and refinance demand expectations align with our own forecast: With interest rates stabilizing in 2020, we expect a decline in refinance activity and slightly higher purchase activity.”

Citing the Mortgage Bankers Association’s Quarterly Mortgage Bankers Performance Report, Fannie Mae reported that on a per-loan basis, lender’s net production income has been on the rise over the first three quarters of 2019. Lenders reported third quarter 2019 earnings of $1,924 per loan, versus a third quarter average of $1,061 over the last three years.

For purchase mortgages across all mortgage loan types, the net share of lenders reporting demand growth over the prior three months, as well as the net share reporting growth expectations for the next three months, remained positive and reached the highest readings for any fourth quarter in the survey’s history.

For refinance mortgages, across all loan types, the net share of lenders reporting demand growth over the prior three months continued the upward trend that began in the first quarter of 2019 and reached new survey highs since the first quarter of 2014. Demand growth expectations on net for the next three months fell significantly from the survey highs of last quarter, but the net share of lenders that expect refinance volumes to increase remains well above shares observed a year ago across all loan products.

The pace of credit easing remained similar to last quarter. Overall, most lenders reported no major changes in their underwriting credit standards for the prior three months and expected no major changes for the next three months.

The survey included responses from 188 senior executives representing 168 lending institutions of all sizes.