Fixed mortgage rates jumped again this week, with Freddie Mac’s widely watched survey saying lenders were offering 30-year home loans at an average of 4.58% — which is the highest rate Freddie has reported in two years.
These higher rates could reduce the number of borrowers able to either refinance their home loans at lower rates, or acquire financing for a home purchase.
What does this mean for California’s economy?
Wells Fargo, the No. 1 home lender, told 2,300 mortgage workers Wednesday that their jobs would be eliminated in 60 days, saying demand for refinancings was much lower than last year and earlier this year.
The impact in the greater Los Angeles area will be 393 employees, most at locations in Orange County and the rest in San Bernardino. An additional 69 employees in San Diego are being handed pink slips, a Wells Fargo spokesman said.
JPMorgan Chase & Co., the No. 2 mortgage lender, said two weeks ago that it would eliminate 3,000 mortgage-related jobs.
Chase and Wells Fargo said they were trying to find jobs elsewhere in their operations for the employees losing jobs.
Mortgage rates are rising on expectations by investors that the Federal Reserve would start cutting back on its stimulus program later this year. The Fed has been buying $85 billion a month in Treasury bonds and mortgage-backed securities, creating a demand that has kept interest rates low.
Experts say the rising rates have caused some fence-sitting potential homebuyers to jump into the housing market before rates rise still higher. However, the increased demand for purchase mortgages has not compensated for a sharp decline in refinancings as the rates go up.
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