We all know rates are rising, purchases are now a bigger chunk of the pie and everyone is tightening up processes to ensure they can be as efficient and profitable as possible. It’s getting tough. And just in case anyone missed it, things are getting tough for our pals over at Wells Fargo too.
I would encourage you to check out the article linked below, but if you’re a bit pressed for time, here are the highlights:
- Their Q1 Mortgage Application Pipeline was at the lowest level since the recession, sitting at $24B. As you can see from the chart below, they have had their usual seasonal decline, but the concern is that Q1 has typically provided an uptick in pipeline volume, but this year the numbers are basically flat.
- Q1 Applications were also at their lowest since the recession dropping from $63B in Q4 to $58B in Q1. The last time Application volumes were near these levels were back in Q4 2013 and Q1 2014 where Applications were at $65B and $60B respectively. This drop back in 2013/2014 was the same 8% drop experienced in Q4/Q1 this year, so while not atypical from a percentage standpoint the dollars are post-recession lows.
- Q1 Originations were down ~19% from Q4 to Q1 at $43B dropping from $53B. This number, while low for them, is not the lowest number since the recession ($36B in Q1 2014) and is pretty much on par with their Q1 origination volumes over the past couple years which were both at $44B.
- In addition to the volumes falling across the board as indicated above, their Net Interest Margin (NIM) has dropped slightly from 2.87% to 2.84% YOY.
- Along with (NIM) flatlining, average deposit costs have doubled YOY from 0.17% to 0.34%
- However, the most dire part for lending overall is towards the end of the article which highlights some of their Consumer Loan trends as well:
- Auto Loans are down $10.9B, or ~15% YOY.
- Credit Cards are up $1.4B, or ~4% YOY.
- Student Loans are down~$600M YOY.
- Personal Loans are down ~$900M YOY.
- In addition, branch referrals are down over the past year.
All of this data highlights that rising rates are making it tougher for one of the largest FI’s in the country to originate loans – both Mortgage & Consumer loans. Their mortgage application trends are typical of what we are seeing with clients and hopefully the declining pipeline is not an indicator of things to come for mortgage shops across the country.
If you have the time, it’s worth checking out the analysis in the link below.