Mortgage credit availability dropped in May to a reading of 120, according to the Mortgage Bankers Association’s Mortgage Credit Availability Index (MCAI).
It is the third straight month of decline, and this reading is the lowest level since July 2021.
The MCAI analyzes data from ICE Mortgage Technology. A decline in the MCAI shows lending standards tightening, while an increase shows standards loosening. It was benchmarked to 100 in March 2012.
The Conventional MCAI fell 0.4%. The Government MCAI fell 1.3%. Of the component indices of the Conventional MCAI, the Jumbo dropped 1.1% and the Conforming rose 1%.
“The index remains more than 30% below pre-pandemic levels, as recent months’ credit tightening has occurred in refinance loan programs,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
“Last month’s tightening was most notable in the government and jumbo segments of the mortgage market. The decrease in government credit was driven mainly by a reduction in streamline refinance programs, as mortgage rates increased sharply through May, slowing refinance activity. Jumbo credit availability, which was starting to see a more meaningful recovery from 2020’s pullback, declined after three months of expansion.”
Mortgage rates averaged 5.23% last week, rising again after a weeks-long downward streak. A year ago this time they averaged 2.96%.
“The housing market is incredibly rate-sensitive, so as mortgage rates increase suddenly, demand again is pulling back. The material decline in purchase activity, combined with the rising supply of homes for sale, will cause a deceleration in price growth to more normal levels, providing some relief for buyers still interested in purchasing a home,” said Sam Khater, Freddie Mac’s Chief Economist.