Credit conditions improve across loan types, but tight supply continues to challenge borrowers
Mortgage credit availability rose in October, reaching its highest level since April 2023, according to the Mortgage Credit Availability Index (MCAI) from the Mortgage Bankers Association (MBA). While this signals a slight loosening of credit conditions, access to mortgages remains limited, with overall credit levels hovering near historic lows seen during 2011-2013.
The MCAI, which measures the accessibility of mortgage credit, edged up 0.7% in October to a reading of 99.2. The index, benchmarked to 100 in March 2012, reflects the level of credit availability, with increases indicating easing lending standards.
“Notably, while credit availability was higher over the month, it was for a specific segment of borrowers,” MBA deputy chief economist Joel Kan said in the report.
Kan noted that improvements were most significant for cash-out refinance programs and loans requiring lower loan-to-value ratios (LTV) and higher credit scores. Additionally, jumbo loan programs saw increased availability, contributing to the rise in the jumbo MCAI.
The Conventional MCAI, tracking non-government-backed loans, rose by 1.0%, while the Government MCAI, which includes loans backed by FHA and VA programs, increased by 0.4%. Among conventional loans, jumbo loans saw the largest growth, with the jumbo MCAI rising by 1.2%, followed by a 0.9% uptick in the Conforming MCAI, which covers loans that meet Fannie Mae and Freddie Mac limits.
Rising rates stall applications
Even as credit availability improved, rising mortgage rates continued to dampen refinancing activity.
The average rate for 30-year fixed-rate mortgages with conforming loan balances climbed to 6.86% in October, the highest since July 2024. This include limited refinancing demand, with the MBA’s Refinance Index dropping 2% compared to the previous week. Despite the decline, refinancing activity was still 43% higher than the same period a year ago.
“Mortgage rates continued to increase last week, driven by higher Treasury yields as financial markets digested the likely impacts of a Trump presidency,” Kan said. “The Federal Reserve’s 25-basis-point rate cut was already anticipated and did little to move the markets. However, despite the increase in rates, applications increased for the first time in seven weeks.”
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The MBA reported a slight uptick in overall mortgage applications, which rose 0.5% on a seasonally adjusted basis. However, unadjusted applications fell by 2%. Purchase applications increased 2% on a seasonally adjusted basis but were down 2% unadjusted from the previous week. Compared to the same period a year ago, purchase applications were up by 1%.
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