Mortgage lenders continue to pull back amid market downturn
Mortgage credit supply declined to a decade-low in July as banks and lenders pulled back on underutilized programs.
The Mortgage Bankers Association’s Mortgage Credit Availability Index (MCAI) dropped three basis points to 96.3, the lowest reading since 2013. The decline is also a sign that lenders are tightening their credit standards.
“Declining origination volumes have led to lower profitability for many lenders, resulting in narrower loan product offerings to reduce operational costs,” said MBA deputy chief economist Joel Kan.
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Liquidity remained a major concern for some jumbo lenders. The jumbo index declined for the third consecutive month as lenders further cut back on their supply of jumbo loan programs.
“One key driver of this month’s decline was a drop in cash-out refinance loan programs,” Kan explained in the report. “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.”
The Conventional index edged down 0.5%, while the Conforming component increased 0.2% and the Jumbo index fell 0.8%. The Government index was down 0.1% in July.
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