Mortgage Credit Availability Fell In January

Mortgage credit availability fell in January after inching up in December, falling to its lowest level since August 2021, according to the Mortgage Bankers Association’s (MBA) Mortgage Credit Availability Index (MCAI).

The MCAI dropped by 0.9% to 124.8 in January, wiping out December’s 0.8% increase. This indicates that lending standards are tightening, while increases show loosening credit. The index was benchmarked to 100 in March 2012.

The Conventional MCAI fell 2.5%, though the Government MCAI rose by 0.7%. Within the Conventional MCAI, the Jumo MCAI fell by 1.6% and the conforming MCAI fell by 4.2%.

“The decline in credit supply came at a time of rising mortgage rates and limited inventory, which add to the challenges that some prospective buyers are facing. The supply of conforming mortgage credit dropped to its lowest level dating back to 2013, driven by a decrease in investor demand for loan programs catering to borrowers with higher LTVs and lower credit score profiles,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. 

“Prior to last month, there were six months of increasing jumbo credit supply, driven by strong demand, rapid home-price appreciation, and the overall strength in the economy. That growth streak ended last month, as investors reduced their willingness to purchase jumbo loans and also raised credit requirements.” 

Credit availability is critical to homebuyers are home prices and interest rates continue climbing. This is especially true for first-time homebuyers who rely on government mortgage programs.

Though there has been an uptick in jobs and an increase in personal incomes, record inflation may temper any gains that would help buyers trying to compete in a competitive market.

Fannie Mae’s Home Purchase Sentiment Index fell 2.4 points to 71.8 in January, its lowest level since May 2020.

Younger consumers in particular said they expect home prices to continue skyrocketing and reported more pessimism about the economy. They reported being optimistic about their future finances, but less optimistic about their current personal finances.

“All of this points back to the current lack of affordable housing stock, as younger generations appear to be feeling it particularly acutely and, absent an uptick in supply, may have their homeownership aspirations delayed. On the whole, the latest HPSI results are consistent with our forecast of slowing housing activity in the coming year,”  said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.