Many Want A Home But Debt, Costs Keep Them Renting


High inflation and the economic impacts of COVID are destroying the dreams of Americans who want to have a home, mortgage and credit card experts warn.

That’s because the pandemic has driven many people deeper into credit card debt since 2020 and that, along with rising interest rates and inadequate housing stock, are reducing the number of new mortgages.

“Overall, I would say they are declining,” Linda McCoy, Board President of the National Association of Mortgage Brokers, told The Mortgage Note.

U.S. mortgage applications declined 8.1% in the week ended March 18th, according to the Mortgage Bankers Association. That followed a 1.2% decline in the previous week.

This happened, MBA officials noted, as mortgage rates were the highest in three years. Applications to refinance a home loan declined 14.4%, while those to purchase a home edged down 1.5%, according to the MBA. 

“The jump in rates comes as markets moved to price in a much faster pace of rate hikes, as well as expectations of fewer MBS purchases from the Federal Reserve,” said Joel Kan, an MBA Economist.

Part of the reason for a declining home mortgage market in America is consumers’ excessive debt due to inflation and income loss, researchers say.

According to a study, about 30 percent of Americans saw an increase in credit card debt over the last two years, driven primarily by inflation and loss of income.

For the study, 1,249 consumers were surveyed and the “tale of two pandemics” was revealed.

While 30 percent of respondents went deeper into debt, the same number in the two-year period reduced their card debt, according to the study.

About half of the people surveyed cited inflation and 34 percent cited income loss as the primary factor in driving them deeper into debt.

“Inflation has been such a massive story and placed such hardship on so many Americans that it makes sense that it would be at the top of the list,” said Matt Schulz, Chief Credit Analyst with LendingTree.

“We’ve seen many cases where folks have overspent to make up for how crummy the last two years have been,” he added.

High credit card bills can have a dramatic effect on whether a bank will give a potential borrower a mortgage.

Credit scores come into play during the home buying process and may determine whether or not a mortgage application is approved, even if the potential borrower has a good income.

Bill Hardekopf, a Card Industry Analyst with, said it is important to maintain a good credit score because the lower their credit scores are, the higher a buyer’s interest rate could be.

“Or they potentially may not be approved at all.” Hardekopf said.

In an interview with The Mortgage Note, Hardekopf said the second biggest element in a person’s credit score is their credit utilization. It accounts for 30 percent of credit scores.

“Consumers should aim to make this under 30 percent. If the only credit you have is your credit card and your credit utilization is well above that 30 percent threshold, your credit score will be negatively impacted by your credit card debt and you may not get that home loan,” he says. 

Hardekopf gives an example of someone who would have trouble getting a mortgage under the 30 percent rule. 

“So, if you have $4,000 in credit card debt and your available credit card debt is $6,000. You’re using 67 percent of your available credit,” he explains. That, Hardekopf adds, will mean one is unlikely to obtain a mortgage. 

McCoy explained that mortgage brokers look at the buyer’s debt to income ratios.

“We evaluate their qualifying income and credit scores along with the content of their credit report, how much money they plan on putting down, and job stability. It all boils down to the more they owe, the less home they will be able to afford, ” McCoy said.

And the priciness of the loan directly relates to the interest rate, which is a key factor in ensuring payments are bearable, according to McCoy.

While interest rates are now projected to go up several percentage points over the next few years to ensure inflation doesn’t become unmanageable, McCoy notes just half a percent can dramatically change a 30-year loan. That can cost a homeowner tens of thousands of dollars over the life of a loan. 

For instance, McCoy says the difference of just half a percent, 4.5 percent versus 4.0 percent, on a $200,000 loan over 30 years can amount to about $21,000.

Story idea? Email Editor Kimberley Haas: [email protected]