Analysts are suggesting brokers will see little in the way of a rate war for the rest of 2012 as the big banks look to protect interest margins in a slowing market.
The analysis comes a day before the first of the Big Five trod out earnings reports for the third quarter on Tuesday. The expectation is those numbers will restate the case for more conservative mortgage pricing as the growth in new mortgages creeps forward.
"I expect lending to continue to slow down, especially on the mortgage side, as we move into the latter half of 2012 and into 2013," Tom Lewandowski, an analyst at Edward Jones, told reporters. “That just creates more of a focus on expenses, given the interest rate environment that we're operating in currently."
Interest margin are continuing to shrink as the books of all lenders begins to reflect the shift to lower interest rate mortgages. That means that even outside the vagaries of the bond market banks are taking in less mortgage interest even as the rates they offer depositors remains stable or increases in some cases.
The phenomenon suggests lenders are more likely to hold their mortgage rates or increase them as RBC and others did last week.
That could be relatively good news for brokers if some mono-lines hold their rates at current levels. Still, brokers are now bracing for a rate reset as early as the end of August. That kind of wholesale move could erode any competitive advantage brokers now enjoy over the banks.
But the current slowing environment is expected to hang around well into 2013, caution analysts. That may, in fact, encourage higher numbers of buydowns among brokers. There are also fears that mono-lines will also reduce commissions, effectively following FirstLine’s lead.