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Mortgage Credit Availability on the Rise in October

According to the Mortgage Bankers Association (MBA), mortgage credit availability rose in October 2023 by 1% to 98.2 in October. A decline in the MCAI indicates that lending standards are tightening, while increases in the Index are indicative of loosening credit. The MCAI was benchmarked to 100 in March 2012.

For the report, MCAI analyzed data from ICE Mortgage Technology.

By loan type, the Conventional MCAI increased 1.7% in October 2023, while the Government MCAI increased slightly by just 0.3%. Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 2.7%, and the Conforming MCAI was unchanged from the previous month.

“Mortgage credit availability rose in October, but the growth was driven by increased activity in the jumbo market. The Jumbo Index increased by 2.7% to the highest level in 14 months–its third straight monthly increase. However, despite the uptick in credit availability recently, we are still close to the lowest levels since 2013. Loan offerings remain narrower as lenders have reduced capacity to cope with the lower origination volumes,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “Some lenders responded to the challenging rate environment and offered more ARM products, as mortgage rates increased by over 40 basis points on average in October, reaching almost 8% in the second half of the month.”

The Conventional, Government, Conforming, and Jumbo MCAIs are constructed using the same methodology as the Total MCAI and are designed to show relative credit risk/availability for their respective index. The primary difference between the total MCAI and the Component Indices are the population of loan programs which they examine. The Government MCAI examines FHA/VA/USDA loan programs, while the Conventional MCAI examines non-government loan programs. The Jumbo and Conforming MCAIs are a subset of the conventional MCAI and do not include FHA, VA, or USDA loan offerings. The Jumbo MCAI examines conventional programs outside conforming loan limits, while the Conforming MCAI examines conventional loan programs that fall under conforming loan limits.

Freddie Mac reports the 30-year fixed-rate mortgage averaged 7.5% as of November 9, 2023, down from the previous when it averaged 7.76%. A year ago at this time, the 30-year FRM averaged 7.08%.

Contributing to the slight drive down in rates, the Federal Reserve’s Federal Open Market Committee (FOMC) decided to pause any nominal interest rate hikes at the conclusion of their two-day meeting on November 1. This string of rate hikes that preceded since the pandemic has been necessary according to the FOMC to tamp down inflation, which reached a high of 9.1% in June 2022. While inflation has eased, it is still above the committee’s target rate of 2%. The target rate now stands at 5.25-5.50%, and the FOMC holds its final meeting of the year December 13-14.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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