According to the Federal Reserve Bank of St. Louis, the denial rate for mortgage applications rose to 15.1% in 2024, up from 12.2% in 2021, coinciding with a rise in mortgage rates from below 3.5% to over 6.5%. As mortgage rates peaked at 8% in 2023, total applications fell to 3.5 million, down from more than 5.2 million in 2021, with a denial rate of 15.7%.
The current average rate for a 30-year fixed mortgage is 6.61%. Experts, including Jessica Lautz from the National Association of Realtors, note that affordability issues remain unchanged, with the median mortgage payment increasing slightly to $2,152 in April. The median price of existing homes rose to $417,700, a 22% increase from April 2021.
The research highlights that a significant reason for the increase in denials is the debt-to-income ratio, which has become a critical factor for lenders, with 35% of denials attributed to this metric. This ratio is particularly challenging for first-time homebuyers, often exacerbated by student loan debt.
The findings suggest that while there is substantial demand from young adults wanting to enter the housing market, the combination of high rates and stringent lending criteria is creating barriers to homeownership