Lending Standards Remain Tight Despite Slight Increase in Mortgage Credit Availability
Mortgage credit availability held steady in April as lenders continued to scale back their mortgage programs, according to the latest data from the Mortgage Bankers Association (MBA).
The Mortgage Credit Availability Index (MCAI), which measures lender underwriting criteria, edged up by 0.1% to a level of 94 last month. This slight increase indicates marginally looser credit conditions, but the index remains near levels not seen since over a decade ago, as it is benchmarked to 100 from March 2012.
“Mortgage credit availability was little changed in April, with categories like conventional, conforming, and jumbo seeing very small monthly gains,” said MBA deputy chief economist Joel Kan in the report. “The supply of credit has stabilized, expanding slightly over the past four months but staying close to 2012 lows.”
Within the overall index, conventional mortgage credit availability increased by 0.3%, with both conforming and jumbo loan categories experiencing equal 0.3% rises. However, the availability of government-backed loans, such as FHA and VA loans, remained flat from March.
The MCAI is a composite measure tracking the credit criteria of over 95 wholesale and investor-based mortgage lenders. A decrease in the index indicates tighter lending standards, while an increase suggests easing credit conditions.
Kan explained that mortgage lenders are still cutting back due to decreased demand and profitability challenges caused by the high mortgage rate environment.
“Lenders continue to reduce capacity, with mortgage rates still above 7% and origination volume moving at a slow pace,” he said. “Even with challenging affordability conditions and fairly strong housing demand, credit remains tight, and housing supply is low.”
Despite the modest increase in credit availability last month, there was a brief resurgence in borrower demand. Mortgage applications rose by 2.6% following three weeks of declines, driven by a temporary dip in mortgage rates.
The conventional 30-year mortgage rate fell by 11 basis points, while the FHA rate dropped by 17 basis points to 6.92%, dipping below 7% for the first time in three weeks.
“Treasury rates and mortgage rates fell last week on the news of a slowing job market, with wage growth at the slowest pace since 2021, and the Federal Reserve’s announced plans to ease quantitative tightening in June and maintain its view that another rate hike is unlikely,” said MBA chief economist Mike Fratantoni.
Overall, while mortgage credit availability shows signs of stabilization, lenders remain cautious amid ongoing economic uncertainties and high mortgage rates.
