A recent analysis reveals that mortgage applications from borrowers of color, particularly Black and Latinx individuals, are denied at disproportionately higher rates than those from white borrowers, highlighting persistent inequalities in the housing market.
In 2023, 27.2% of Black applicants were denied a mortgage, more than double the 13.4% of white applicants, according to an analysis by the Urban Institute’s Housing Finance Policy Center. The data, sourced from the Home Mortgage Disclosure Act (HMDA), shows a 10-percentage-point disparity compared to the overall denial rate across all racial groups.
The data also reflects broader inequities in homeownership. In 2023, Black borrowers made up just 8.5% of all mortgage applicants, and the Black homeownership rate stood at 45.3% in 2024—30 percentage points below the 74.4% rate for white households. Latinx homeownership fared slightly better at 48.5%, but still trailed behind white households.
Researchers Michael Neal and Amalie Zinn of the Urban Institute initiated the study after noticing shifting denial rates as borrowing costs fluctuated. Their findings suggest that rising interest rates not only impact affordability but exacerbate racial disparities in mortgage approvals.
The data further reveals significant challenges in refinancing mortgages, with Black and Latinx homeowners facing denial rates of 38.4% and 37.5%, respectively, compared to just 21.8% for white homeowners. This limits opportunities for borrowers of color to benefit from lower interest rates or improve their financial standing.
“These disparities reflect deep-rooted inequities in the housing market,” said Zinn, noting that borrowers of color often make smaller down payments, leaving them with less equity over time and making them more vulnerable to economic fluctuations.
Although mortgage rates have dropped recently, the Federal Reserve’s ongoing efforts to stabilize the economy could impact vulnerable borrowers. “If you already have a degree of vulnerability, a cooling economy will only amplify it,” Neal warned.
The findings underscore the need for continued efforts to address systemic barriers in mortgage lending and homeownership, particularly for communities of color.
