The Federal Reserve Bank of New York's Center for Microeconomic Data revealed Monday that rejection rates for new mortgage applications declined over the past four months. That comes amidst an increase in mortgage credit availability last month.
The Survey of Consumer Expectations found that there was a higher creditworthiness among consumers who applied for new mortgages in 2023. However, it also found that looking ahead over the next 12 months, households will be less likely to apply for a new credit card, purchase or refinance a mortgage loan, or an auto loan.
The Mortgage Bankers Association (MBA) reported last week that mortgage credit availability increased 1% in October. Broken down by loan type conventional mortgage credit increased 1.7%, government loans increased 0.3% and jumbo loans increase 2.7%, which are indications that credit is loosening.
"Despite the uptick in credit availability recently, we are still close to the lowest levels since 2013. Loan offerings remain narrower as lenders have reduced capacity to cope with the lower origination volumes,” said Joel Kan, MBA’s deputy chief economist.
Overall, mortgage applications have dipped since last year, with the lowest levels seen in October.
The New York Fed said mortgage loan application rates declined to 4.3% in October 2023 from 6.7% in October 2022. The average rate for 2023 overall was 5.7%, 1.5 percentage points below the 2022 average, and 2.2 percentage points below the 2019 average.
At the same time rejection rates have decreased, according to the Federal Reserve's Survey of Consumer Expectations, by 2.5 percentage points to 12.1% in 2023, remaining above the 2019 rate of 10.2%.
The survey, which seeks to provide insight into experiences and expectations regarding credit demand and access, is done every four months. It found the average likelihood of applying for a mortgage decreased further to 6.7%. from 7.3% in 2022. The average likelihood of applying for a mortgage refinance over the next 12 months reached a new series low of 3.5% in October 2023. For the year overall, the average likelihood of applying for a mortgage refinance dropped to 4.7% in 2023 from 6.1% in 2022.
