Higher interest rates led to a significant reduction in overall mortgage affordability in 2022, according to the Consumer Financial Protection Bureau’s annual report on residential mortgage lending activity and trends released yesterday. The bureau reported that the total number of applications and originations dropped significantly last year, with applications decreasing by about nine million, or 38.6%, and originations decreasing by 6.6 million, or 44.1%. The median total loan costs for home purchase loans in 2022 was $5,954, up 21.8% from $4,889 the year before.
Lenders reported approximately 6.7 million closed-end site-built single-family originations in 2022, a 50.9% decrease from 13.7 million originations in 2021, according to the CFPB. The decline occurred in both home purchase and refinance activities but was more prominent in refinance. The refinance originations for these homes fell from 8.3 million in 2021 to 2.2 million in 2022, a reduction of 73.2%.
Most of the refinance originations left in the market were a small number of cash-out refinance loans, the CFPB said. Meanwhile, the total number of HELOC originations among reporters in both 2021 and 2022 increased by 33.3%. The increase is most likely due to some consumers using HELOCs instead of cash-out refinance loans in a high-interest rate environment, the bureau added.