(Reuters) – U.S. mortgage lenders turned optimistic about profits in the second quarter for the first time in nearly three years as tumbling interest rates led to a jump in demand for home loans, a survey from Fannie Mae showed on Wednesday.

The share of lenders surveyed who said they expect their profits to increase in the next three months exceeded the share of those who expect a decrease by 29 percentage points.

The reading was the second most positive since the survey began in the first quarter of 2014.

The latest figure was a switch from the first quarter when the share of lenders who were pessimistic about future profits exceeded the share of those who were optimistic by 8 percentage point.

“This quarter, ‘consumer demand’ jumped significantly and is now the top reason cited by lenders who reported an increased profit margin outlook, reaching the highest reading since Q2 2016,” the mortgage finance agency said in a statement.

Average 30-year interest rates on “conforming” mortgages fell to 4.23% last week, the lowest since January 2018, as home borrowing costs have fallen in step with U.S. bond yields on worries about weakening economic growth due to trade tensions between the United States and its trading partners, according to the Mortgage Bankers Association.

The drop in mortgage rates had spurred applications for home purchases and refinancing in late March and early April, but those application activities have tapered since, MBA data showed.

“A lift in lender sentiment from depressed levels is an encouraging sign; however, many challenges remain, including the continued shortage of entry-level housing,” Fannie Mae’s chief economist Doug Duncan said.

Meanwhile, the easing of lending standards among home lenders reached their lowest levels since 2014 in the second quarter, but it will unlikely ease much more, according to Duncan.

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