Higher mortgage rates don't just keep buyers on the sidelines. Application denials rise too

Key points

• Catherine Delahaye | Digitalvision | Getty Images Higher interest rates do more than just deter potential homebuyers — they may also block consumers from qualifying for a mortgage, according to new research.
• The rate of denials in loan applications was 15.1% in 2024, up from 12.2% in 2021, a rise that occurred alongside a surge in mortgage rates from below 3.5% to more than 6.5%, researchers at the Federal Reserve Bank of St. Louis said in a new blog post.
• At the same time, however, fewer consumers were applying for mortgages as rates peaked at 8% in 2023, the research shows.
• Total applications fell to 3.5 million that year — when the denial rate was 15.7% — from more than 5.2 million in 2021. The St. Louis Fed researchers used data covering more than 30 million home purchase applications.
• With the current average rate on a 30-year fixed-rate mortgage at...