Mortgage Credit Availability Increases For Fifth Straight Month

Mortgage Credit Availability on the Rise

Mortgage credit availability saw a slight uptick in May, according to the Mortgage Credit Availability Index (MCAI) released by the Mortgage Bankers Association (MBA). This report, which utilizes data from ICE Mortgage Technology, provides valuable insights into the current lending landscape.

The MCAI rose by 0.1% to 94.1 in May. An increase in the MCAI indicates that lending standards are loosening, while a decline suggests tighter credit conditions. The index, benchmarked to 100 in March 2012, serves as a valuable barometer for the mortgage credit environment.

Breakdown of Component Indices

The MCAI is designed to provide a snapshot of the relative credit risk and availability and is broken down into component indices that represent different segments of the mortgage market:

  • Government MCAI: This index examines FHA, VA, and USDA loan programs, reflecting the availability of government-backed loans, and decreased by 0.1%.

  • Conventional MCAI: This index, which focuses on non-government loan programs, increased by 0.3%.

  • Conforming MCAI: This index focuses on conventional loan programs within conforming loan limits and rose by 0.5%.

  • Jumbo MCAI: This index examines conventional loan programs outside conforming loan limits, and increased by 0.1%.

Expert Insights

Joel Kan, MBA’s Vice President and Deputy Chief Economist, commented on the gradual rise in mortgage credit availability: “Mortgage credit availability rose gradually in May and has increased for five consecutive months. The overall supply of mortgage credit is still close to 2012 lows but is slowly increasing. The industry has reduced capacity over the past two years in response to extremely low unit volumes. Conventional, conforming, and jumbo credit availability have expanded slightly in recent months as lenders broaden loan offerings to reach more potential homebuyers in a tight purchase market.”

Implications for Homebuyers

The rise in the MCAI suggests a slow but steady improvement in mortgage credit availability, which could be beneficial for potential homebuyers, especially in a tight purchase market. As lending standards loosen slightly, more buyers may find it easier to secure financing. While the overall supply of mortgage credit remains close to 2012 lows, the consistent increase over the past five months is a positive sign.

The gradual rise in mortgage credit availability, as indicated by the MCAI, reflects a cautious yet positive shift in the lending landscape. As lenders expand their offerings, potential homebuyers may find more opportunities to secure financing, albeit in a still-challenging market.

(Source: mba.org)

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