By Michael S. Derby
(Reuters) - Americans applied for mortgage credit in greater numbers over recent months even as they faced greater headwinds in getting those loans, new data from the Federal Reserve Bank of New York released Monday said.
The bank’s report said that the overall application rate for credit increased to 43.4% in February, the highest reading since October 2022, from 42.5% in October and 40.3% last June. While application rates for auto loans and mortgage refinancing hit the lowest levels in the survey’s history, mortgage application rates rose to 5.6% of survey respondents in February, from 4.3% in October, the New York Fed said.
The bank’s report found that those applying for credit faced better odds last month, with the overall rejection rate ebbing to 18.7% from 21.1% in October. Meanwhile, even as application rates increased for mortgages, rejection rates for that type of borrowing jumped to 22.5% in February from 13% the prior quarter.
Application rates for other types of borrowing—auto loans, credit cards, mortgage refinancings--declined as of February relative to October, according to the bank.
The findings came from the bank’s monthly Survey of Consumer Expectations, which is best known for its readings on the expected path of inflation.
The rise in the applications rate for mortgages comes as that part of the economy continues to face decidedly hard times amid high borrowing costs. Two years ago the Fed embarked on an aggressive campaign of short-term interest rate rises that lifted rates from near zero levels to the current level of between 5.25% and 5.5%, as officials tightened policy to push down high levels of inflation.
That policy shift sharply raised the cost of borrowing to buy a home, while also making most other forms of borrowing more expensive. But as inflation has come down, the Fed has been moving toward rate cuts, and that outlook has helped lower mortgage rates, making home borrowing appear more doable for some Americans.
Last month, the New York Fed said overall borrowing levels rose modestly in the last three months of 2023, amid signs some Americans were facing challenges dealing with that debt.