The most recent annual report from the Consumer Financial Protection Bureau (CFPB) confirmed that mortgage lending plunged substantially in 2023.

The report was derived from loan-level information made public via the Home Mortgage Disclosure Act (HMDA). Per HMDA data, the counts of both loan originations and applications were slashed by one-third on an annual basis, with the former down by 32% and the latter by 30% from one year prior. The number of originations decreased by some 2.7 million, with 2023’s volume standing at just 38% of the recent peak in 2021.

The drop in refinance volume was more pronounced than in purchase activity; single-family refis fell by 64%, with most of the refinance originations still taking place limited to a small number of cash-outs. The count of purchase loans, on the other hand, retreated by 21%.

With 2023’s rising mortgage rate environment, affordability challenges were a key reason driving the plunge in activity. The average monthly payment, excluding taxes and insurance, for a conventional conforming 30-year fixed-rate mortgage was $2,045 in December 2022. By December 2023, that figure had risen to $2,295. Despite the bump in monthly payments, the average debt-to-income ratio did not see a meaningful change, likely reflecting lenders shifting toward higher-income buyers and away from lower-income applicants.

Notably, cost-conscious borrowers got creative in their hunt for affordability in 2023, with more than half of all borrowers paying discount points. Fifty-six percent of borrowers did so, a pickup of nearly 13% from one year prior. The median discount points paid was about $3,000 for purchases and $3,900 for refinances.

Median total loan costs, including origination fees and discount points, rose to $6,684 in 2023, a 12% increase from 2022. Loan costs for refis ballooned, with the median total loan cost for a refinance at $7,329 in 2023 — up more than 47% from the previous year.

HMDA data also revealed that non-depository institutions, such as independent mortgage lenders, continued to increase their market share at the expense of banks and credit unions. Nonbank lenders originated nearly 62% of all purchases (about 1.7 million loans) and 64% of refinances (about 355,000 loans) in 2023.