Monthly Mortgage Credit Availability Rose Only Slightly in August

The uptick was driven by an increased number of mortgage loan programs, economist says.

House atop a pile of money
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Lending standards loosened in August but remain at very low levels, according to a new survey.

The Mortgage Credit Availability Index (MCAI) increased by 0.3% to 96.6 in August, indicating that lending standards are loosening but remain at very low levels, according to the Mortgage Bankers Association’s (MBA) monthly survey.

A decline in the MCAI indicates that lending standards are tightening while an increase in the MCAI indicates that lending standards are loosening, MBA said.

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The MCAI was benchmarked to 100 in March 2012, according to the survey, which analyzes data from Intercontinental Exchange Inc. (ICE) Mortgage Technology

The Conventional MCAI rose 0.6%, while the Government MCAI remained unchanged. Of the component indices of the Conventional MCAI, the Jumbo MCAI rose 2.7% and the Conforming MCAI decreased 2.7%, the survey showed.

“Credit availability in August increased slightly but remained close to the very low levels last seen in January 2013,” said Joel Kan, MBA’s vice president and deputy chief economist.

An increase in the number of loan programs, which included factors such as cash-out refinances and mid-range credit scores, drove the overall increase, he said. The conforming index dropped to its lowest level since 2011, while the jumbo index increased after three monthly declines, he added.

Industry capacity continues to decline

“Industry capacity continues to decline as lenders reduce staffing and simplify their product offerings to reduce costs and raise profitability,” Kan said. “While this dynamic has led to lower credit availability, it has also provided some lenders with new opportunities to expand some of their product offerings, and we saw some of that growth in the jumbo space last month.”

Recent economic data suggests that the Fed could pause interest rate hikes for the rest of 2023 and maybe even start cutting rates in 2024, which would ultimately bring mortgage rates down and lead to increased demand.

However, Fed Chair Jerome Powell has repeatedly stated that cutting rates too early could allow inflation to rebound. The central bank, he said, remains committed to reaching its 2% inflation target.


Joey Solitro

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.