Regional bank executives are seeing more signs of strain across mortgage businesses as higher interest rates slow home purchases.
“We’re near the bottom of where revenues are going to be, and you’re starting to see people give up the ghost,” Citizens Financial Group Chief Executive Officer Bruce Van Saun said Monday at a financial-services conference hosted by Barclays. “People are saying there’s too much capacity,” leading to layoffs.
The pandemic supercharged home sales, but aggressive rate hikes by the Federal Reserve have caused the business to sputter and led to job cuts across the industry. Mortgage rates jumped to the highest level since 2008 last week, with the average for a 30-year loan reaching 5.89%, while application volume has plummeted by more than 50% this year. U.S. pending home sales in July fell to the lowest level since the start of the pandemic.
U.S. Bancorp Chief Financial Officer Terry Dolan said at the conference that the Minneapolis-based bank expects its mortgage revenue to decline 30% to 35% this quarter from the previous three months.
The biggest U.S. banks are responding as well. Citigroup joined the ranks of companies trimming their mortgage workforce earlier this month, eliminating fewer than 100 positions. JPMorgan Chase in June cut hundreds of home-lending employees and reassigned hundreds more as the housing market cooled, and Wells Fargo plans to shrink its sprawling mortgage operation.