With higher interest rates, the mortgage industry has originated or brokered fewer loans, seen expenses rise and laid off thousands of employees. As a result, there has been a big drop in office leasing activity by mortgage banks and the brokers operating independently from banks.
The square footage of new office leases signed by mortgage banks in the first quarter fell 85% from the first quarter last year, before interest rates started rising, according to CoStar data. Going back to the first quarter of 2020 when the pandemic was declared, 183 leases were signed, while the first quarter this year had only 17.
Independent mortgage banks lost $2,812 on each loan they originated in the fourth quarter, according to the more than 2,000-member Mortgage Bankers Association trade group.
The losses have driven major cost-cutting. Financial service firms announced 24,437 job cuts last year, up 127% from 2021, outplacement firm Challenger, Gray & Christmas reported. Moreover, first-quarter layoffs this year among all financial services firms including mortgage banks were even higher than all of last year combined, with financial services employers laying off 30,635, up 419% from a year earlier.