New mortgage applications reached a low not seen in more than a generation, according to recent statistics. The lower numbers also signal that the nation’s economy is more fragile than previously believed and may pose an electoral challenge for President Joe Biden in his reelection campaign.
According to data from the Mortgage Bankers Association, the number of mortgage applications fell by more than 4% in mid-August. This represents the lowest level since 1995.
The lower rate of mortgage starts reflects a number of factors, including unusually high interest rates. Currently, the average for a 30-year mortgage is more than 7.3%, the highest level in more than two decades.
In addition, the lower mortgage origination rate also reflects the sharply higher price of housing over the last several years. Persistent inflation has helped drive up the cost of both new and existing homes.
Our country is in decline. This decline is not inevitable. It is a choice.
We need to reverse American decline, and it starts with understanding that we must reverse Bidenomics.
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— Ron DeSantis (@RonDeSantis) August 24, 2023
A number of conservative activists also blame restrictive business and building policies in cities and states dominated by the Democratic Party.
In addition, some critics of the president point to a Biden administration policy that would use funds from homebuyers with good credit to lower the payments of borrowers with poor credit. The new Federal Housing Finance Agency rules would raise the price of a $400,000 mortgage by $40 per month among those with good credit.
The rule would allow borrowers with lower down payments or earning ability to qualify for higher loan amounts than they would otherwise.
Republican critics of federal housing policy have blamed at least a portion of the 2008 financial crash on policies that they believe forced banks to lend to potential buyers with poor credit.
The higher mortgage interest rates also reflect efforts by the Federal Reserve to tamp down on inflation, which has increased significantly since Biden took office in 2021.
The Fed’s decision to raise interest rates has had an effect on inflation while also reducing the number of new mortgages and general borrowing by Americans.