For the mortgage industry, 2020 was a year filled with challenges coming at us from seemingly every angle. Moving forward into 2021, adjusting our strategies to meet these challenges will be the key to our success, and the success of our customers.
As long-term rates dropped before the Federal Reserve began making moves on short-term rates, the spread between what’s paid on deposits and earned on loans continued to flatten, hurting profits for many community banks. Last week’s decision by the Federal Reserve to cut interest rates for the third time this year could add some steepness back to the yield curve and help reverse this trend.
While the Federal Reserve’s recent forecast of no more rate hikes in 2019 will result in some desired relief on deposit pressure at community banks, it could also spell trouble in the form of additional spread compression.
