The stock market may be bracing for a disappointing earnings season ahead. However, financial sector exchange traded funds could lead as banks post positive profits on improving home-loan business.

The financial sector has been falling behind the broader market so far this year, but it could soon turn around. Year-to-date, the Financial Select Sector SPDR (NYSEArca: XLF) dipped 2.9%, iShares U.S. Financials ETF (NYSEArca: IYF) fell 1.6%, Fidelity MSCI Financials Index ETF (NYSEArca: FNCL) declined 1.6% and Vanguard Financials ETF (NYSEArca: VFH) decreased 1.5%. In contrast, the SPDR S&P 500 ETF (NYSEArca: SPY) was up 0.5%.

According to FactSet, the financial sector could outperform as the surprisingly robust mortgage business bolsters banks’ earnings, reports Paul Vigna for the Wall Street Journal.

Many believed that banks were going to suffer as rising interest rates would sap mortgage demand. However, interest rates remained depressed this year, supporting the mortgage market.

In Fannie Mae’s recent quarterly survey of senior mortgage-lender executives, over half of respondents said demand for mortgages rose over the past three months, reports John Carney for the Wall Street Journal. In contrast, only 17% of a December survey respondents expected higher mortgage demand.

Consequently, 41% of executives now anticipate better margins from mortgage lending as  30-year fixed mortgage rates dipped to an average 3.69% last week, down from 4.4% year-over-year.

While FactSet anticipates overall S&P 500 companies to experience a 4.6% contraction in profits, the first quarterly decline in profit growth since 2009, John Butters, senior earnings analyst at FactSet, points out that financials could post positive results of 8.4% ahead on the improved mortgage lending, reports Wallace Witkowski for MarketWatch.