Year-over-year rejection rates declined for new mortgage applications last month, according to new data from the Federal Reserve Bank of New York’s Survey of Consumer Expectations Credit Access Survey, which attributed the downturn as a likely reflection on the “higher creditworthiness among the smaller group of consumers who applied for new mortgages in 2023.”
The New York Fed noted that reported application rates for any kind of credit over the past 12 months “declined notably over the past year, following a smaller decline in 2022.” Overall, the average 2023 application rate of 41.2% was below the 2022 level of 44.8% and below its pre-pandemic 2019 level of 45.8%. Reported rejection rates among applicants increased by 2.1 percentage points to 20.1% in 2023 from 18.0% in 2022; it was also well above its 2019 level of 17.6%.
Mortgage loan application rates declined to 4.3% in October from 6.7% one year earlier. 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. The October reading was a new low in this data analysis.
Application rates for mortgage refinancing declined further during 2023, falling to 3.3% in October from 8.9% one year before 2022. The October level is below the levels that prevailed before the pandemic and also represents a new low for this data analysis.
The average rejection rate of mortgage applications decreased by 2.5 percentage points to 12.1% in 2023, remaining above the 2019 rate of 10.2%. The average rejection rate on mortgage refinance applications increased to 15.5% in 2023 from 9.9% in 2022.
Looking ahead, the New York Fed determined the average likelihood of applying for a mortgage over the next 12 months decreased to 6.7% from 7.3% in 2022, while the average likelihood of applying for a mortgage refinance over the next 12 months reached a new low of 3.5% in October. For the year overall, the average likelihood of applying for a mortgage refinance dropped to 4.7% in 2023 from 6.1% in 2022.