Wells Fargo, the nation’s largest mortgage company based on loan value, recently told investors that they expect a decrease in mortgage originations of almost 30% in the third quarter this year, a loss of $32 billion.
Mortgage rates have been rising throughout the year, and while the impact has been felt by many people in different ways, most recently it’s the lenders who are suffering. It’s not just the companies that are burdened by these recent changes though; it’s their employees too, as many of these mega-lenders are starting to cut jobs as well. As we know in the RE business if you don’t have a job you can’t buy a house.
Other major banks, such as J.P. Morgan Chase and Bank of America, are in similar positions. J.P. Morgan recently announced that they expect to lose a significant amount of mortgage-origination business later this year, while Bank of America has already informed 2,100 of its employees that they will be laid off due to the loss of business. Similarly, Wells Fargo has already terminated over 3,000 employees, a loss of about 1% of the company’s total workforce.
Lenders are not the only ones feeling the pinch of these rising rates. If fewer mortgages are being signed there are fewer buyers on the market, putting a damper on the business of agents and brokers, and the situation becomes even gloomier considering that these trends may continue to worsen. Marianne Lake, J.P. Morgan’s chief financial officers, recently reported that mortgage originations are likely to descend as far as 40%, and that the bank has already seen a reduction in refinance applications of over 60% since May this year.
While increasing mortgage rates have had a major impact on the loss of loan business, there are other sources influencing this too. Paired with increases of mortgage rates, increasing home values have been knocking many potential buyers out of the market as they simply cannot afford certain homes anymore. Even those who can afford to buy may choose to wait till rates lower, as both mortgage rates and home values are some of the highest we’ve seen in years.
Have recent increases in mortgage rates been impacting your business? What are your thoughts?
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