Mortgage credit availability hits pre-pandemic high

MBA's latest report shows loosening of lending standards

Mortgage credit availability hits pre-pandemic high

Low interest rates and a slowing refi market has pushed mortgage credit availability to a pre-pandemic high, according to a report from the Mortgage Bankers Association (MBA).

MBA’s Mortgage Credit Availability Index (MCAI) increased by 1.4% to 129.9 in May, indicating that lenders are loosening credit standards. The index was benchmarked to 100 in March 2012.

“Mortgage credit availability in May increased to its highest level since near the start of the pandemic but still remained at 2014 levels. The increase was driven by a 3% gain in the conventional segment of the market, with a rise in the supply of ARMs and cash-out refinances. This is consistent with the uptick in mortgage rates and a slowing refinance market, as well as MBA’s weekly applications survey data showing increased interest in ARMs,” said Joel Kan, associate vice president of economic and industry forecasting at MBA.

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The Conventional MCAI rose 3.5%, while the Government MCAI dipped by 0.3%. Of the component indices of the Conventional MCAI, the Jumbo MCAI grew by 5.1%, and the Conforming MCAI was up by 1.6%. 

“The jumbo index jumped 5% last month, but even with increases over the past two months, the index is still around half of where it was in February 2020,” Kan said. “A rapidly improving economy and job market have freed up jumbo credit, as banks have deposits to utilize. However, there is still plenty of restraint, as many sectors have not fully returned to pre-pandemic capacity, and there are around two million borrowers still in forbearance.”