Citi Is the Latest to Cut Jobs as Interest Rates Rise
The recovering housing market has been an enormous source of revenue for America’s major financial institutions. Wells Fargo (NYSE:WFC) emerged from the recession as the nation’s No. 1 mortgage originator, beating out Bank of America (NYSE:BAC) for the top spot with more than $100 billion in new mortgage loans each month since the fourth quarter of 2011.
But after nearly two years of strong gains in the mortgage sector, the tide appears to be receding. Interest rates have increased dramatically over the past few months and, as a result, mortgage origination and refinancing activity has generally been on the decline. The average contract interest rate for a 30-year fixed-rate mortgage increased to 4.46 percent in August, up from 4.37 percent in July and well above the 3.66 percent average in 2012.
The rising rates have lowered demand for new mortgages and refinancing, resulting in layoffs at many major financial institutions. Most recently, Citigroup (NYSE:C), the third-largest U.S. bank by assets and the sixth-largest mortgage lender in the first half of 2013, joined the ranks of those announcing job cuts. Reuters reports that Citigroup will lay off about 1,000 jobs from its mortgage division.