Rejection Rates Higher For Older Mortgage Applicants According To Study

Mortgage News March 3, 2023

A new study found that the likelihood of being rejected for a mortgage increases with age, regardless of how much financial resources and credit scores older Americans have.

“Are Older Mortgage Applicants More Likely To Be Rejected?” is the title of the study. The Boston College Center for Retirement Research published it this month. It was an adaptation of a study by an economist at the Federal Reserve Bank of Philadelphia, Natee Amornsiripanitch, who is not connected with the Center.

Regardless of the variables, this pattern appears. It states that the findings do not follow from older individuals applying to more stringent lenders, nor are the results altered by excluding 2020 applications, indicating they did not follow from the COVID-19 pandemic.

The study indicates that the qualitative results of separate estimates for government-guaranteed loans are the same, as well as the same pattern for cash-out refinances.

According to the study, life expectancy or age-related mortality risk are obvious examples. When a borrower dies, the lender is more likely to be forced to pay off the loan early (prepayment risk) or enter foreclosure (default and recovery risk). Older borrowers face greater risks than younger borrowers, all else equal.

A number of factors suggest that the study’s findings may be influenced by age-related mortality risk.

First, mortality risk increases with age, just as rejection probability does. Second, rejection probability increases with age, which is in accordance with the fact that mortality risk increases with age. Third, rejection probability differs more between men and women as they age, which is in line with men and women experiencing different mortality risks as they age. Lastly, lenders could require more collateral as age-related mortality risks increase, thus explaining the insufficient collateral explanation.

The study concludes that older individuals should be aware of the fact that they are more likely to be denied credit regardless of the reasons for their denial.

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