The Consumer Financial Protection Bureau (CFPB) has recently published findings revealing a considerable drop in mortgage applications and originations in 2023, primarily due to the rise in interest rates.
This decline has been particularly impactful on borrowers of color, who are facing steeper increases in mortgage costs compared to their white and Asian peers.
Significant Decline in Applications and Originations
Data drawn from the Home Mortgage Disclosure Act (HMDA) shows a striking 30% decrease in mortgage applications and a 32% decline in originations compared to the previous year.
Among these decreases, refinance activities saw an even sharper downturn, plummeting by nearly 64% for single-family homes.
Interestingly, the few refinance transactions that did occur largely involved cash-out refinancing.
Impact on Borrowers and Rising Costs
As monthly mortgage payments soared due to higher interest rates, the average expense of a conventional 30-year fixed-rate mortgage rose from $2,045 in December 2022 to $2,295 by the end of 2023.
Despite this uptick in costs, borrowers’ debt-to-income ratios remained relatively stable during this period.
An additional noteworthy finding from the report is that over half of all single-family mortgage originations in 2023 included discount points.
This marks a significant milestone, as it is the first time since HMDA began its tracking in 1975.
For home purchase loans, borrowers paid an average of around $3,000 for discount points, while those refinancing faced median costs closer to $3,900.
Shifting Market Dynamics
Moreover, the report highlights a concerning trend: the rise in total loan costs has affected Black and Hispanic borrowers more significantly than their white and Asian counterparts.
This disparity brings attention to the ongoing inequalities within the mortgage market.
The landscape of mortgage origination is also shifting.
Non-depository institutions, particularly independent mortgage banks, are capturing a larger portion of the market.
In 2023, these companies constituted nearly 62% of closed-end home purchase loans and more than 64% of refinancing loans, suggesting a transformation in who is leading the charge in mortgage lending.
In summary, the CFPB’s report paints a complex picture of the mortgage industry in 2023, characterized by declining applications and originations, rising costs, and shifting market dynamics—a situation that demands attention from policymakers and stakeholders alike.
Source: Housingwire