CFPB reports a ‘significant’ decline in mortgage activity in 2023
Mortgage application and origination activity fell by roughly a third between 2022 and 2023 as high interest rates suppressed broader industrial activity. This is evident from data from the Home Mortgage Disclosure Act (HMDA), published by the US government Consumer Financial Protection Bureau (CFPB) in one report released Friday.
According to the report, the decline was steeper for refinances than for purchase loans. The refis for single-family homes had fallen by almost two-thirds compared to 2022, while the average cost of a home also increased significantly last year.
In 1975, more borrowers reported paying “discount points than any other year since recordkeeping began” in 1975, when HMDA began requiring financial institutions to collect and publicly release information about mortgage applications and originations at the loan level.
“Applications and new applications continued their downward trend in 2023, with applications falling 30% from 2022 and new applications falling 32%,” the report said. “Refinancing of single-family homes fell by 64%. The majority of refinancing initiatives that remained in the market consisted of a small number of cash-out refinancing loans.”
Rising interest rates largely drove consumers to higher monthly mortgage payments, with a conventional conforming 30-year fixed-rate mortgage rising from $2,045 in December 2022 to $2,295 a year later. Despite rising interest rates fueling this increase, the debt-to-income ratio showed no significant change over the same period.
“More than 56% of single-family home loans paid some discount points in 2023, an increase of nearly 13% from 2022,” the report said. “The average discount points paid for home purchase loans were approximately $3,000 and for refinance loans were approximately $3,900.”
Average total borrowing costs for home purchases also rose faster for people of color, the report found. Black and Hispanic mortgage borrowers saw sharper increases than their white and Asian counterparts.
Additionally, non-depository institutions such as independent mortgage banks (IMBs) have captured a larger share of application and origination activity in 2023 compared to banks and credit unions.
“In 2023, independent mortgage companies serviced nearly 62% of all home purchase loans and more than 64% of refinancing loans,” the report said.
