JPMorgan’s mortgage business lays off, reassigns hundreds of employees as rates climb

JPMorgan Chase’s mortgage business has become the latest victim of layoffs as the Federal Reserve’s efforts to rein in searing inflation drives up rates and dampens housing demand.

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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 reassigned to different divisions of the bank.

“Our hiring decision this week was the result of cyclical changes in the mortgage market,” a JP Morgan spokesperson told FOX Business. “We have been able to proactively move many affected employees to new roles within the company and are working to help the remaining affected employees find new employment within Chase and outside of it.”

Jerome Powell, Chairman of the U.S. Federal Reserve, speaks during a Senate Banking, Housing, and Urban Affairs Committee hearing in Washington, DC, Wednesday, June 22, 2022. (Ting Shen/Bloomberg via Getty Images/Getty Images)

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 benchmark federal funds rate in a range between 1.50% and 1.75%, the highest since the pandemic began two years ago.

RISE IN MORTGAGE RATES HIT THE “MOST DIFFICULT” HOMEBUYERS: REAL ESTATE EXPERT

Officials also set an aggressive course of rate increases for the rest of the year. New economic projections released after the Fed’s two-day meeting showed policymakers expect interest rates to reach 3.4% by the end of 2022, which would be the lowest level high since 2008.

In addition to JPMorgan, Wells Fargo has also laid off or reassigned employees from its home loan business.

“We conduct moves in a transparent and thoughtful manner and provide assistance, such as severance packages and career advice. Additionally, we are committed to retaining as many employees as possible,a Wells Fargo spokesperson told FOX Business. “Of those who have been impacted by home loans so far this year, approximately 35% are moving into other roles within Wells Fargo.”

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Redfin also announced last week that it would lay off about 8% of its workforce, citing property demand down nearly 20% from 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, down from 4.98% in April. The average engagement rate over the whole of 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 the previous month. Year over year, sales of existing homes fell 8.6%.

JP Morgan Chase HQ

The headquarters of JP Morgan Chase & Co. – The JP Morgan Chase Tower at Park Avenue – in Midtown Manhattan, NY January 27, 2014. (Tim Clayton/Corbis via Getty Images/Getty Images)

“Further declines in sales should be expected in the coming months given housing affordability issues related to the sharp rise in mortgage rates this year,” said Lawrence Yun, chief economist of the National Association of Realtors, in a press release. “Nevertheless, appropriately priced homes are selling quickly and inventory levels still need to rise significantly – almost double – to cool home price appreciation and provide more options for homebuyers.”

The median existing home price for all housing types in May was $407,600, up 14.8% from May 2021, as prices rose in all regions. Properties generally remained on the market for 16 days in May, compared to 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.

Total housing inventory stood at 1.16 million units at the end of May, up 12.6% from April, but down 4.1% from April. last year. Unsold inventory sits at 2.6 months supply at the current selling rate, down 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.

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