Home loan interest rates surged to a 14-year high in June after the Fed hiked rates by 0.75% percentage point
. The average rate on a 30-year fixed-rate mortgage, the most common U.S. home loan, was 5.3% as of July 7, up from 2.9% a year ago, according to Freddie Mac.
Gerard Cassidy, head of U.S. bank equity strategy at RBC Capital Markets, said the bigger banks were starting to downsize too. “We expect it to continue throughout the year as the refinancing business remains under considerable pressure.” In the first quarter, Wells Fargo reported a 33% year-on-year decline in mortgage revenue, while JPMorgan said home lending net revenue was down 20%. That decline is expected to continue in the second quarter.
Some small lenders have fared much worse. Texas-based mortgage lender First Guaranty Mortgage Corp filed for bankruptcy last month.Bank of America Corp, another large mortgage lender, has not cut staff and has no plans to do so this year, said a source familiar with the matter. In fact, the bank expects “good, balanced” mortgage loan growth for 2022, said Deutsche Bank analyst Matt O’Connor.
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