2022 Mortgage Applicants Sought Larger Loans, Faced Deeper Debt

In 2022, the housing market started out hot, as determined home buyers piled on despite many challenges. Inventory was low, prices and competition were high. But beginning in March of that year, mortgage rates began a dramatic climb that would temper demand by the end of the year.

The average rate on a 30-year fixed mortgage went over 4% in March 2022 for the first time since 2019; it topped 5% in April, the first time since 2011. And by the close of 2022, interest on this most common mortgage type would exceed 7%, a rate not seen in over 20 years.

A look at 2022 mortgage application data from the Consumer Financial Protection Bureau shows some of the initial effects of these higher-and-higher rates. The number of mortgage applications ultimately fell by 16%, and the number of home loans originated — those approved and funded — fell by roughly 1 million compared with the year prior.

Applications fall, requested loan amounts grow (but slower)

Roughly 6 million home purchase mortgage applications were filed with lenders in 2022, according to the data provided under the Home Mortgage Disclosure Act. This marks a 16% decrease in applications from 2021, when about 7.1 million were submitted.

Higher mortgage rates and low inventory no doubt contributed to the reduction. It was one thing to cope with steep home prices when rates were ultra-low in 2021, but steeper rates made already higher prices even less affordable in 2022. Growth in the amount people hoped to borrow did slow during the year, however — the average loan amount for originated mortgages climbed 8% year over year, to $369,900 in 2022. This compared with 15% growth from 2020 to 2021.