As Mortgage Rates Soar... US Largest Bank JP Morgan Also Conducts Massive Layoffs

Hundreds Laid Off and Redeployment Also Expected to Reach Hundreds
Impact of Plummeting Loan Demand as Mortgage Rates Soar

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Hyunjung] JP Morgan, the largest bank in the United States, is laying off hundreds of employees related to mortgage loans. This decision comes as a result of decreased demand due to rapidly rising mortgage interest rates.

On the 22nd (local time), Bloomberg News cited anonymous sources explaining, "JP Morgan is laying off hundreds of mortgage loan employees and redeploying several hundred more." It was reported that the number of employees affected by these layoffs and job adjustments will exceed 1,000 within the United States alone.

A JP Morgan spokesperson stated in a press release that day, "We have enabled employees to move into new roles within the company, and we are also making efforts to help other employees find new jobs both inside and outside JP Morgan."

This decision is interpreted as a consequence of the Federal Reserve's (Fed) interest rate hikes aimed at controlling inflation. At the June Federal Open Market Committee (FOMC) regular meeting, the Fed decided on a 'giant step' by raising the benchmark interest rate by 0.75 percentage points at once. Thanks to long-term low interest rates, the average rate for 30-year fixed-rate mortgages in the U.S., which had been maintained at a low level, rose to 5.78% last week. Immediately after the rate hike announcement, it even exceeded 6%.

The market froze instantly. According to data recently released by the National Association of Realtors (NAR), existing home sales in the U.S. in May were 5.41 million (annualized), a sharp drop of 8.6% compared to a year earlier, marking the lowest level in two years.

Wells Fargo, the largest mortgage lender in the U.S., is also reported to have laid off and redeployed some employees in its mortgage-related departments. Earlier this month, industry peers such as Compass and Redfin announced plans to reduce their workforce by 6-10%.

Beyond real estate, companies in various industries such as Facebook, Twitter, and cryptocurrency exchange Coinbase are also withdrawing hiring plans. Netflix, interactive fitness platform Peloton Interactive, and used car seller Carvana have also announced layoff plans. The Wall Street Journal (WSJ) described this as "a sign that the labor market, which was the tightest in decades just a few months ago, is showing cracks." WSJ reported, "Although the unemployment rate is 3.6%, close to the half-century low reached in early 2020, executives find it too difficult to predict the economy over the next 12 months," adding, "Business outlooks are changing so rapidly that hiring plans made just weeks ago must be canceled."

This content was produced with the assistance of AI translation services.