The median interest rate for home purchase loans continued to be higher for black and Hispanic white borrowers than for all other racial and ethnic groups.
The median interest rate on FHA loans for home purchases was 5.125%, higher than other enhanced loan types. Jumbo loans, on the other hand, had the lowest median interest rate at 4.215%. Dollar amounts paid by borrowers who paid discount points to buy down interest rates were also greater than in previous years.
In 2022, the number of applications and originations decreased significantly. Applications decreased by 9 million or 38.6%, while originations decreased by 6.6 million or 44.1%.
Lenders reported 6.7 million closed-end site-built single-family originations in 2022, a 50.9% decrease from 13.7 million originations in 2021. There was a significant decline in both home purchase and refinance activities, but refinancing was more prevalent. The number of refinancings for site-built single-family homes fell from 8.3 million in 2021 to 2.2 million in 2022, a reduction of 73.2%.
It was mainly cash-out refinance loans that dominated the refinance market. Reporters originated 33.3% more HELOCs in 2021 and 2022 than the year before. Due to high-interest rates, some consumers opt for HELOCs instead of cash-out refinancing loans.
Despite fast-rising interest rates and an overall sharp decline in refinance volume, the share of refinance loans for black and Hispanic white borrowers, low-income borrowers, and borrowers who secured their loans with low- or moderate-income properties was larger in 2022 than it was in 2021.
As compared with 2021, total loan costs for home purchase loans were estimated at $5,954, an increase of 21.8%. According to HMDA data, this is the largest annual increase in total loan costs since 2018. The median total loan cost for refinancing loans in 2022 was $4,979, compared to $3,336 in 2021. The increase represents a 49.3% increase. The median total loan costs for Hispanic white and Black borrowers in 2022 increased more than those for Asians and non-Hispanic whites.
A higher percentage of borrowers reported paying discount points in 2022 than in any other year since this data point was collected in the HMDA data. Additionally, borrowers who paid discount points also paid a much higher dollar amount in points.
DISTRIBUTION OF HOME PURCHASE AND REFINANCE LOANS, BY BORROWER AND NEIGHBORHOOD CHARACTERISTICS
Black and Hispanic white borrowers had lower median credit scores and higher denial rates. Additionally, they paid higher median interest rates and total loan costs than non-Hispanic whites and Asians.
For borrowers taking out a conventional conforming 30-year fixed-rate mortgage, the average monthly payment excluding taxes and insurance grew from $1,400 in December 2021 to $2,045 in December 2022 – a 46.1% increase. Mortgage interest rate increases were almost entirely responsible for this increase. As a result, all groups saw their average debt-to-income ratio (DTI) rise significantly, especially Hispanic white and Black borrowers.
Across all racial/ethnic groups, DTI (debt-to-income ratio) was reported as a more common denial reason in 2022 than in 2021.
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