JPMorgan Chase and Wells Fargo hit by record-low mortgage applications

Two of the largest US mortgage lenders, JP Morgan Chase and Wells Fargo, reported quarterly results last Friday.

headline numbers? Revenue generated by both banks has been hit by record-high mortgage rates, record-low mortgage applications and ongoing market volatility. Year-over-year, Wells Fargo’s new mortgage values ​​are down about 60% and JPMorgan Chase’s are down 67%.

  • JPMorgan Chase and Wells Fargo saw significant declines in mortgage revenue in Q3 2022.
  • These declines were due to record low demand for new mortgages.
  • Meanwhile, demand for mortgages has been dampened by record-high interest rates and ongoing market volatility.

Mortgage income is declining at both banks

Wells Fargo’s Earnings Report for Q3 2022 indicates that mortgage applications are down significantly compared to last year. Wells Fargo has set up its $21.5 billion residential first mortgage in the third quarter of 2022. This is down 36.1% from Q2 2022 and down 58.6% from Q3 2021.

JP Morgan Q3 2022 Earnings Report Draw a similar dark picture. Mortgage originations in Q3 2022 reached $15.2 billion. Compared to the previous quarter, this is a 45.5% decline in the value of new mortgages. Compared to the same quarter last year, revenue is even lower, down 67%.

Neither bank is on Investopedia’s roundup, but Best Mortgage Lenders of 2022, showing the overall market that it is struggling to attract new mortgage customers. Interest rates on new mortgages ended the quarter at his highest level since 2007, pushing weekly mortgage applications to his lowest level in 25 years, according to The New York Times. Mortgage Bankers Association.

High interest rates and market volatility hit mortgage market

The most direct reason for the record low demand for new mortgages is simply that current interest rates are so high. Mortgage rates have been at historically low levels for much of this year due to macroeconomic factors, particularly the Federal Reserve’s purchases of billions of dollars in bonds in response to the economic pressures of the pandemic. was kept in But record-high inflation over the past two quarters has caused the Fed to reverse course, with the federal discount rate he raised five times this year.These actions pushed mortgage rates to their 20-year peak last few weeks.

However, there are some other factors as well. As noted by JP Morgan CEO Jamie Dimon, mortgage lenders face many challenges. “Inflation, rising interest rates, rising mortgage rates, oil, volatility, [and] War,” he said, so the decline in mortgage income across the market is “fairly predictable.”

Despite a decline in mortgage applications, both banks said their overall financial conditions remained strong.

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