Mortgage credit availability began to ease in March, indicating that lenders will be ready to take on lower-skill borrowers as the economy recovers.
The Mortgage Bankers Association's Mortgage Credit Availability Index rose 0.6% to 125.4 in March, after peaking at 124.6 in February. The number falls far short of last year's 152.1 level, even after the index fell to a five-year low as coronavirus lockdowns kicked in and lenders became more risk averse. Since March 2020, the MCAI has been moving at a level that has not been reached since 2014.
Recent interest rate growth and an extreme housing shortage have constrained mortgage activity during the time of year when it normally increases. The slight expansion in loan supply in March could be a sign that lenders are recognizing these increasingly unfavorable market conditions for borrowers. It also reflects a rebounding labor market and the impact of multiple economic reviews adding to the level of low credit and high mortgage lending products underwritten.
"When we look at the anticipated growth in the shopping market driven by millennials and first-time home buyers, the availability of credit to qualified borrowers will play an important role in supporting that demand," said Joel Kan, associate vice of the MBA president Economic and industrial forecast said in a press release.
Each market segment grew monthly in March. The conventional index rose 0.8% from February and the conformant component rose 0.2%. State MCAI – including Federal Housing Administration, Veterans Affairs, and Rural Housing Service loans – grew for the sixth time in the past seven months, rising 0.4% to its highest level in a year.
The Jumbo Index led overall growth with a monthly jump of 1.5%, marking the sixth consecutive month with an expanded supply of jumbo loans. This resulted from the Consumer Financial Protection Bureau's revisions to the rules for qualifying mortgages and the ability to repay, as well as skyrocketing house prices for 2020, a reversal from the pandemic outbreak, Kan added.