NEW YORK - JPMorgan Chase's mortgage business has become the latest casualty of layoffs as the Federal Reserve's efforts to tame scorching-hot inflation send rates higher and dampen housing demand.
A source familiar with the matter confirmed to FOX Business that hundreds of employees will be laid off, while hundreds of others will be reassigned to different divisions at the bank.
"Our staffing 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 impacted employees to new roles within the firm and are working to help the remaining affected employees find new employment within 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 key benchmark federal funds rate at a range between 1.50% to 1.75%, the highest since the pandemic began two years ago.
Officials also laid out an aggressive path of rate increases for the remainder of the year. New economic projections 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 been laying off or reassigning employees in its home-lending business.
"We are carrying out displacements in a transparent and thoughtful manner and providing assistance, such as severance and career counseling. Additionally, we are committed to retaining as many employees as possible," a Wells Fargo spokesperson told FOX Business. "Of those impacted in home lending so far this year, about 35% are moving into other roles within Wells Fargo."
Redfin also announced last week it would be laying off approximately 8% of its workforce, citing real estate demand falling nearly 20% short of expectations in May.
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 across all 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. On a year-over-year basis, existing home sales receded 8.6%.
"Further sales declines should be expected in the upcoming months given housing affordability challenges from the sharp rise in mortgage rates this year," National Association of Realtors Chief Economist Lawrence Yun said in a statement. "Nonetheless, homes priced appropriately are selling quickly, and inventory levels still need to rise substantially — almost doubling — 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 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 that were sold were on the market for less than a month.
Total housing inventory is at 1.16 million units as of the end of May, up 12.6% from April but down 4.1% compared to the previous year. Unsold inventory sits at a 2.6-month supply at the current sales pace, up from 2.2 months in April and 2.5 months in May 2021.
FOX Business' Megan Henney contributed to this report. Bloomberg was the first to report this story.