(RTTNews.com) – Wells Fargo & Co. ( WFC ), the fourth-largest bank in the U.S. by assets, will cut 2,300 mortgage-related jobs across the U.S. as higher interest rates slow down refinancing activity, according to media reports on Wednesday.
Wells Fargo has reportedly provided a 60-day layoff notice to 2,300 employees in its home-lending unit based in Iowa as it braces for a further drop in demand for new mortgages. The San Francisco-based company had 274,300 employees at the end of the recent second quarter.
Wells Fargo is the largest originator of home mortgages in the U.S. and under a federal program, has the mandate to originate, underwrite, and certify mortgages for FHA insurance.
The bank had been bolstering its mortgage operations in 2012 to reflect an increase in refinancing activity due to historically low interest rates. However, the increase in long-term interest rates in June 2013 is now slowing refinancing activity and is expected to end a mortgage refinancing boom.
Interest rates have been rising after the U.S. Federal Reserve indicated in May that it may start to scale back its massive bond-buying program later this year. The rising interest rates are expected to end a mortgage refinancing boom.
According to the Mortgage Bankers Association, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $417,000 or less increased to 4.68 percent in the week ended August 16, 2013 from 4.56 percent in the prior week. The refinance share of mortgage activity decreased to 62 percent of total applications from 63 percent the previous week.
Wells Fargo’s mortgage-banking income for the recent second quarter declined 3 percent from the year-ago period to $2.80 billion and total mortgage applications were down 30 percent. Refinances as a percentage of applications were 54 percent in the quarter, compared to 69 percent in the prior-year period.