High interest rates have contributed to a significant drop in homebuying volume
Today, the Consumer Financial Protection Bureau (CFPB) released its annual report on trends in the residential mortgage lending market. 2023 showed a significant decline in mortgage lending activities, with loan applications and originations dropping by about a third from 2022. The decline was more prominent in refinancing activity than home purchase, with single-family refinance originations down nearly two-thirds from 2022. Median total loan costs also jumped significantly in 2023, with a higher percentage of borrowers reported having paid discount points than any other year since tracking of the data began.
Since 1975, the Home Mortgage Disclosure Act (HMDA) requires financial institutions to collect and make public certain loan-level information on mortgage applications and originations. Responsibility for administering HMDA was transferred to the CFPB in 2011.
Key findings from this year’s analysis include:
- Loan applications and originations for both home purchase and refinancing activity dropped significantly in 2023. The number of applications and originations continued their downward trend in 2023, with applications decreasing by 30% and originations decreasing by 32% from 2022. Refinancing of single-family homes fell by 64%. Most of the refinance originations left in the market were a small number of cash-out refinance loans.
- Rising interest rates drove higher monthly mortgage payments. The average monthly payment excluding taxes and insurance for borrowers taking out a conventional conforming 30-year fixed-rate mortgage rose from $2,045 in December 2022 to $2,295 in December 2023. The increase in monthly payment was driven almost entirely by the rise in mortgage interest rates. Despite this, the average debt-to-income ratio of home purchase applications did not significantly change year-over-year. This likely reflects lenders shifting toward higher-income and away from lower-income borrowers.
- More than half of all borrowers paid discount points. In 2023, more than 56% of single-family loan originations paid some discount points in 2023, nearly a 13% increase from 2022. The median discount points paid for home purchase loans was about $3,000 and for refinance loans was about $3,900.
- Total loan costs increased, with faster increases for Hispanic and Black borrowers. The median total loan costs for home purchase loans was about $6,700 in 2023, while for refinance loans the loan cost was over $7,300. Notably, Hispanic and Black borrowers experienced faster increases in the median total loan costs for home purchase loans compared to Asian and non-Hispanic white borrowers.
- Non-depository institutions continued to increase their share of originations. Non-depository institutions, such as independent mortgage companies originated significantly more loans than banks and credit unions. In 2023, independent mortgage companies originated nearly 62% of all closed-end home purchase loans and over 64% of refinance loans.
This is the sixth year that the data reflect changes implemented by the 2015 HMDA rule, which implemented statutory changes in the Consumer Financial Protection Act and provided greater information to the public about home mortgage lending.
More information about HMDA and its data can be found here.
Read today’s report, 2023 Mortgage Market Activity and Trends.
The CFPB has resources for consumers about mortgages. Consumers can submit complaints about financial products and services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).
Employees who believe their company has violated federal consumer financial protection laws are encouraged to send information about what they know to whistleblower@cfpb.gov. To learn more about reporting potential industry misconduct, visit the CFPB’s website.