Mortgage Credit Availability Sees Modest Uptick in October

Understanding the Mortgage Credit Availability Index

The Mortgage Credit Availability Index (MCAI), released monthly by the Mortgage Bankers Association (MBA), offers valuable insights into the state of mortgage lending in the United States. In October 2023, the MCAI showed a modest increase of 1.0%, reaching a level of 98.2.

The Mortgage Credit Availability Index (MCAI) is a crucial tool for evaluating the accessibility of mortgage credit. It tracks changes in lending standards, with a higher index value signifying an easing of credit, while a lower value indicates tightening standards. The index was benchmarked at 100 in March 2012.

This shift was predominantly driven by heightened activity in the jumbo mortgage market, with the Jumbo MCAI surging by 2.7%. This increase marked the highest level in 14 months and the third consecutive monthly rise.

Lending Capacity and Interest Rates

Despite the recent growth in credit availability, the report highlights that we are still operating within relatively narrow lending parameters, nearing levels last seen in 2013. One contributing factor to this phenomenon is the reduced capacity of lenders to handle lower origination volumes.

In response to the challenging rate environment, some lenders have introduced more adjustable-rate mortgage (ARM) products. This adaptation comes as mortgage rates experienced an average increase of over 40 basis points in October, reaching nearly 8% in the latter part of the month.

Conventional and Government Indices

Breaking down the index segments, the Conventional MCAI registered a 1.7% increase, while the Government MCAI saw a more modest uptick of 0.3%. Within the Conventional MCAI, the Jumbo MCAI was the standout performer, surging by 2.7%, while the Conforming MCAI remained unchanged from the previous month.

It's important to understand the distinctions between the MCAI component indices. The Government MCAI assesses loan programs like FHA, VA, and USDA loans, which are government-backed. In contrast, the Conventional MCAI focuses on non-government loan programs. The Jumbo and Conforming MCAIs are subsets of the Conventional MCAI, excluding FHA, VA, or USDA offerings. The Jumbo MCAI assesses conventional programs beyond conforming loan limits.

Historical Perspective

For those seeking a broader perspective, the Total MCAI includes an expanded historical series that covers approximately ten years, providing insights into how credit availability has evolved over time. This series offers valuable context, spanning the housing crisis and subsequent recession.

(Source: mba.org)