Mortgage credit availability hits a 10-year low

Availability fell by 0.3% in July, declining to its lowest level since 2013, according to the MBA

Mortgage credit availability dropped to its lowest level since 2013 in July as receding  origination volumes led to lower profitability for many lenders.

Simultaneously, liquidity concerns persisted for some jumbo lenders. As a result, many companies tried to reduce their operational costs by narrowing their loan product offerings, according to Joel Kan, Mortgage Bankers Association’s vice president and deputy chief economist.

The trade group’s monthly Mortgage Credit Availability Index fell by 0.3% to 96.3 last month. A decline of the index, benchmarked to 100 in March 2012, indicates that lending standards are tightening while an increase suggests loosening credit.

“One key driver of this month’s decline was a drop in cash-out refinance loan programs,” said Kan. “The 30-year fixed mortgage rate averaged 6.94% in July, more than a percentage point higher than July 2022, and this has significantly discouraged cash-out refinance activity, as borrowers turn to home equity and consumer loans instead.”

He added that the jumbo index fell for the third straight month, as jumbo lenders further reduce the number of available loan programs.

Meanwhile, the Conventional MCAI, which does not include loans backed by the government, decreased 0.5% and the Government MCAI, which examines FHA, VA, and USDA loan programs, decreased by 0.1%.

Of the two component indices of the conventional index, the Jumbo MCAI decreased by 0.8%, and the Conforming MCAI rose by 0.2%.

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