Mortgage credit availability dips as home prices surge

Availability dropped by 0.7% in March

Mortgage credit availability dropped in March, a sign that lenders tightened credit standards amid insufficient inventory of homes for sale and rising mortgage rates.  

The monthly Mortgage Credit Availability Index fell by 0.7% to 125.1 last month, according to the Mortgage Bankers Association. A decline of the index, benchmarked to 100 in March 2012, indicates that lending standards are tightening while an increase suggests loosening credit.

“Overall credit availability was down slightly in March, driven by a reduction in higher LTV, lower credit score programs,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement. “Credit availability has gradually trended higher since mid-2021 but remains around 30% tighter than it was in early 2020.”

While the Conventional MCAI, which does not include loans backed by the government, rose 0.3%, the Government MCAI, which examines FHA, VA, and USDA loan programs, fell by 1.6%.

Of the two component indices of the conventional index, the Jumbo MCAI climbed by 1.5% and the Conforming MCAI dropped by 1.9%.

The jumbo index rose for 10 consecutive months over the past 12 months with lenders scaling back on jumbo supply at the onset of the pandemic. The index is still 40% lower than the pre-pandemic level, Kan said.

What opportunities do lenders miss out on by not focusing on credit

HousingWire recently spoke to Mike Darne, Vice President of Marketing for CreditXpert, who said focusing first on the borrower’s credit holds the key to winning business that other lenders won’t even see.

Presented by: CreditXpert

The drop in mortgage credit availability follows a free fall of refinance applications driven by rising mortgage rates, now around 5%. Refinance applications fell 10% for the week ending April from the previous week and 62% compared with a year ago, according to a separate report from the MBA earlier this week.

Despite the recovery in the job market and rapid wage growth, surge in mortgage rates and home price appreciation are restraining purchase activity, Kan said in a release.

Home price appreciation rose 20% in February over the previous year, continuing its double-digit gains for 12 consecutive months, according to CoreLogic. While low housing inventory continues to drive up prices, the real estate analytics firm forecast home price appreciation is expected to slow down to about 5% this year with sellers returning to the market.

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