A slowdown in home loans as U.S. interest rates rise may pinch banks' revenue from the nation's biggest consumer-lending market in the final months of 2018 and beyond.

Mortgage originations at Wells Fargo, which laid off 600 employees in that business, fell 22 percent from a year earlier to $46 billion in the three months through September. JPMorgan Chase's community banking business reported a 16 percent drop in such loans, while Citigroup's new residential mortgages dropped 16 percent to $2.7 billion in North America and PNC's retail-banking mortgages fell 16 percent to $2.1 billion.

"Mortgage being a cyclical business as it is, we are, on higher rates, expecting the overall market to be down about 10 percent year-on-year," Marianne Lake, chief financial officer at JPMorgan, told investors on Friday.

The Federal Reserve's decision to raise benchmark short-term interest rates to a range of 2 percent to 2.5 percent, with three increases so far this year, is behind much of the shift, says Stephen Biggar of Argus Research.

"The demand is not quite as strong," he said in a recent interview.

The home mortgage market in the U.S., valued at $10.7 trillion as of the end of June, is "in the midst of an overcapacity period" and will improve over time, said Wells Fargo CEO Tim Sloan. The bank is "looking at the business and trying to see how can we originate more mortgages, how can we do that in a more efficient way," he told investors

While banks typically benefit from rising interest rates, passing on the hikes more quickly to borrowers than to depositors, the margin growth wanes over time as depositors insist on higher returns on their money.

"Banks are having to pass on more of the rate increases to depositors," Brian Foran, a partner at Autonomous Research, told the Washington Examiner. Loan growth was limited in the third quarter, he added, and investors are wringing their hands on where the next round of earnings growth is going to come from.

Despite a bustling economy and high consumer sentiment, earnings from investment banking -- which includes advising corporations on mergers and acquisitions as well as issuing new stock and debt to raise money -- languished across the industry.

Year-over-year, investment banking fees dropped 8 percent at Citigroup in the third quarter and 20 percent at Bank of America. It was flat at Chase.

"It's not been the star of the show, despite what is a pretty strong equity environment, economic activity that you would think would normally lead to higher investment banking generally," Biggar said. "Companies are investing in themselves but they aren't necessarily going out and seeing the need to buy growth."

Still, Wall Street firms Goldman Sachs and Morgan Stanley both reported double-digit growth in the business on Tuesday.