JPMorgan Chase’s mortgage business has become the latest victim of cuts as the Federal Reserve’s efforts to curb hot inflation raise interest rates and reduce demand for housing.
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A source familiar with the matter confirmed to FOX Business that hundreds of employees would be laid off, while hundreds more would be reassigned to various divisions of the bank.
“Our staffing decision this week was the result of cyclical changes in the mortgage market,” a JP Morgan spokesman told FOX Business. “We have been able to actively relocate many affected employees to new roles in the company and are working to help other affected employees find new jobs inside and outside Chase.”
Last week, the Fed raised its key interest rate by 75 basis points for the first time in nearly three decades. This move puts the base reference rate of federal funds in the range between 1.50% and 1.75%, the highest since the pandemic began two years ago.
RISING MORTGAGE INTEREST, HITTING HOME BUYERS FOR THE FIRST TIME “DIFFICULTY”: REAL ESTATE EXPERT
Officials also set out an aggressive way to raise interest rates for the rest of the year. New economic forecasts released after the two-day Fed meeting have shown that politicians expect interest rates to reach 3.4% by the end of 2022, the highest level since 2008.
In addition to JPMorgan, Wells Fargo is also laying off or reassigning employees in its rental business.
“We carry out relocations in a transparent and thoughtful way and provide assistance, such as termination of employment and career counseling. In addition, we are committed to retaining as many employees as possible,” a Wells Fargo spokesman told FOX Business. “Of those affected by housing lending so far this year, about 35% are moving to other roles at Wells Fargo.
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Redfin also announced last week that it would cut approximately 8% of its workforce, citing real estate demand falling by almost 20% from expectations in May.
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According to Freddie Mac, the average commitment rate for a 30-year, conventional fixed-rate mortgage was 5.23% in May, up from 4.98% in April. The average commitment rate for the whole of 2021 is 2.96%.
Meanwhile, sales of existing homes fell to a seasonally adjusted annual rate of 5.41 million in May, down 3.4% from the previous month. On an annual basis, sales of existing homes fell by 8.6%.
“A further decline in sales should be expected in the coming months, given the challenges to housing affordability from the sharp rise in mortgage rates this year,” said Lawrence, chief economist at the National Association of Real Estate Brokers. Jun. “However, affordable housing is selling fast and inventory levels still need to rise significantly – almost doubling – to cool rising house prices and provide more opportunities for home buyers.
The average price of existing housing for all types of housing in May was 407,600 dollars, which is 14.8% more than in May 2021, as prices rose in all regions. Properties typically remain on the market for 16 days in May, which is less than 17 days in April and 17 days in May 2021. About 88% of homes sold have been on the market for less than a month.
The total housing inventory was 1.16 million units at the end of May, which is 12.6% more than in April, but a decrease of 4.1% compared to the previous year. Unsold inventories remain at 2.6-month supply at the current sales rate, an increase of 2.2 months in April and 2.5 months in May 2021.
Megan Henny of FOX Business contributed to this report. Bloomberg was the first to report this story.