JPMorgan Chase (JPM) is slashing jobs in its home-lending division as rising mortgage rates and inflation drive a slowdown in the housing market.
The bank is expected to lay off or reassign more than 1,000 employees, Bloomberg News first reported on Wednesday. Bloomberg’s report indicated “about half” of these impacted workers will be moved to different departments within the bank.
“Our staffing decision this week was the result of cyclical changes in the mortgage market,” a JPMorgan spokesperson told Yahoo Finance, without specifying the magnitude of the decision. “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.”
Earlier this month, the bank’s chief executive officer, Jamie Dimon, warned of a “hurricane” bearing down on the US economy, citing the impact of higher interest rates.
“You’d better brace yourself,” Dimon told an audience of analysts and investors. “JPMorgan is bracing ourselves and we’re going to be very conservative with our balance sheet.”
At the same event, Wells Fargo (WFC) CEO Charles Scharf echoed a similar sentiment, suggesting a downturn in the housing market could impact the bank’s staffing levels.
“When the mortgage market is down the way it is, there’s no getting around that your volumes fall dramatically, and we have to do our best to adjust our infrastructure to support that,” Scharf said. “So as much as you don’t want to be in a position to have to do that, from an employee perspective, we don’t have an obligation to make sure we’re properly staffed.”
Last week, the Federal Reserve raised its benchmark interest rate by 75 basis points, the largest increase in nearly three decades. So far this year, the US central bank’s ramp up on borrowing costs has driven mortgage rates to nearly 6%.
With its recent move, JPMorgan joins a growing list of real estate companies downsizing their workforces to cut costs as higher borrowing rates and surging prices weigh on demand.
Online real estate platform Redfin (RDFN) announced it would let go of 8% of its workforce, with CEO Glenn Kelman citing the slowdown in home sales and a sharp rise in mortgage rates.
Real estate peer Compass (COMP) also said it was downsizing its workforce as companies grapple with a cooling market from last year’s pandemic-driven rise in home sales.
Elsewhere in the housing industry, home developer Lennar (LEN) earlier this week issued one of the starkest statements yet about the impact of interest rate hikes on home buying.
“The Fed’s stated determination to curtail inflation through interest rate increases and quantitative tightening have begun to have the desired effect of slowing sales in some markets and stalling price increases across the country,” Lennar Executive Chairman Stuart Miller said. “[The] weight of a rapid doubling of interest rates over six months, together with accelerated price appreciation, began to drive buyers in many markets to pause and reconsider. ”
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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