According to the report, black mortgage applications are rejected twice as often as whites
A recent analysis shows that mortgage applications by people of color are rejected significantly more frequently than whites.
In 2023, 27.2% of black applicants were denied a mortgage, more than double the 13.4% of whites. That’s 10 percentage points higher than borrowers of all races, according to an analysis of mortgage disclosure laws by the Urban Institute’s Housing Finance Policy Center.
According to the report, black mortgage applications are rejected
The application data confirms the huge disparities in mortgage lending seen elsewhere in the housing market. For example, black borrowers made up just 8.5% of all purchase mortgage borrowers in 2023, according to HMDA. Meanwhile, in 2024, the homeownership rate for black households was 45.3%, 30 percentage points lower than the 74.4% for white households, and 48.5% for Latino households.
Urban Institute researchers Michael Neal and Amalie Zinn saw overall denial rates fluctuate with recent changes in borrowing costs, which prompted them to take a closer look at HMDA data, which many housing industry insiders consider to be the most comprehensive data available to the public.
As the chart above shows, denial rates fell in 2020 and 2021, meaning more mortgage approvals, but rose again in 2022, when the Federal Reserve began raising interest rates to curb inflation.
The Urban Institute researchers’ study makes clear that racial disparities don’t just bar entry into homeownership. Black and Latino homeowners also have significantly higher rates of denials for interest rate refinances, at 38.4% and 37.5%, compared to 21.8% for whites.
The data confirms other deep-rooted inequalities in the housing market, Zinn said. In particular, borrowers of color often take out mortgages with smaller down payments, meaning they accumulate less equity over time.
A cooling economy could impact vulnerable borrowers
Interest rates are likely to fall again. In recent weeks, the average 30-year fixed-rate mortgage has been a full percentage point lower than it was at this time last year, likely due to expectations that the Federal Reserve will cut rates later this month. But anyone worried about vulnerable borrowers should be mindful of a cooling economy, Neal said.
“When you start thinking about where you are in the interest rate cycle and where you are in the broader business cycle, if you already have some vulnerability, that’s really just going to amplify your vulnerability.”
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