By John Carney | The Wall Street Journal
The Federal Reserve’s bond purchases made mortgage refinancings abnormally profitable for banks. But all good things come to an end.
U.S. banks enjoyed a refinancing boomlet in 2015’s first quarter. Investors shouldn’t expect a repeat in the just-finished second quarter, thanks to rising long-term yields.
Each step the Federal Reserve takes on the road to a more normal monetary policy stance leads banks closer to what may be less profitable times for mortgages. One big reason, of course, is that rising yields push mortgage rates higher. That can slow buying activity, but especially chill refinancing.
The latter has been an important source of revenue for banks in recent years as superlow interest rates pressured net-interest margins. Those low rates were in large part a result of Fed bond-buying programs.
