JPMorgan Chase’s mortgage business has become the latest victim of layoffs as the Federal Reserve’s efforts to tame blistering inflation drive up rates and reduce demand for housing.
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A source familiar with the matter confirmed to FOX Business that hundreds of employees will be laid off, while hundreds more will be transferred to different divisions of the bank.
“Our hiring decision this week was a result of cyclical changes in the mortgage market,” a JP Morgan spokesperson told FOX Business. “We were able to proactively move many affected employees into new roles within the company and are working to help the rest of the affected employees find new employment at Chase and externally.”
Last week, the Fed raised its benchmark interest rate by 75 basis points for the first time in nearly three decades. The move puts the main federal funds benchmark rate in a range between 1.50% and 1.75%, the highest since the pandemic began two years ago.
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The authorities also set an aggressive path of rate hikes for the remainder of the year. New economic forecasts released after the Fed’s two-day meeting showed policymakers expect interest rates to hit 3.4% by the end of 2022, which would be the highest level since 2008.
In addition to JPMorgan, Wells Fargo has also laid off or relocated employees in its home loan business.
“We are carrying out the displacements in a transparent and thoughtful way and providing assistance, such as compensation and career advice.” a spokesperson for Wells Fargo told FOX Business. “Of those impacted in home equity so far this year, about 35% are moving to other roles within Wells Fargo.”
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Redfin also announced last week that it would lay off approximately 8% of its workforce, citing housing demand fell nearly 20% below expectations in May.
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According to Freddie Mac, the average commitment rate for a conventional 30-year fixed-rate mortgage was 5.23% in May, up from 4.98% in April. The average commitment rate for the entire year 2021 was 2.96%.
Meanwhile, existing home sales fell to a seasonally adjusted annual rate of 5.41 million in May, down 3.4% from a month earlier. On an annual basis, existing home sales were down 8.6%.
“Further sales declines are to be expected in the coming months, given housing affordability challenges due to the sharp rise in mortgage rates this year,” Lawrence Yun, chief economist at the National Association of Realtors, said in a statement. “However, adequately priced homes are selling fast and inventory levels still need to increase substantially – nearly doubling – to cool home price appreciation and provide more choice for buyers.”
The median existing home price for all housing types in May was $407,600, up 14.8% from May 2021 as prices increased in all regions. Properties typically remained on the market for 16 days in May, down from 17 days in April and 17 days in May 2021. About 88% of homes sold had been on the market for less than a month.
The total housing stock stands at 1.16 million units at the end of May, up 12.6% from April but down 4.1% from a year ago. Unsold inventory is in a 2.6 month supply at the current pace of sales, up from 2.2 months in April and 2.5 months in May 2021.
Megan Henney of FOX Business contributed to this report. Bloomberg was the first to report this story.