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The availability of mortgage loans has been declining for three consecutive months, largely due to a decline in refinancing loans, according to the monthly mortgage availability index (MCAI), which fell by 0.9% to 120%. May, the lowest level since July 2021, according to the Association of Mortgage Bankers.
The decline of the index, which reached 100 in March 2012, indicates that credit standards are tightening, while the increase indicates a weakening of loans.
“The index remains more than 30 percent below pre-pandemic levels as credit escalates to refinance credit programs in recent months,” said Joel Kan, co-vice president of economic and industrial forecasting at the MBA.
The credit tightening is the government’s most well-known and jumbo side, Kan added.
Both conventional MCAIs, which do not include government-supported loans, fell 0.4% and government MCAIs, which revise the FHA, VA, and USDA lending programs, fell 1.3%.
Of the conventional MCAI component indices, Jumbo MCAI decreased by 1.1% and compliant MCAI increased by 1%. “Government credit cuts due to reduced streamlining refinancing programs as mortgage rates have sharpened until May has slowed refinancing activity.
The availability of Jumbo loans, which is beginning to see a more meaningful recovery after the 2020 withdrawal, has been slowing for three months,” Kan said.
The decline in the availability of mortgage loans follows a free decline in refinancing applications, which was caused by rising interest rates – 5.23% on June 9 – measured by Freddie Mac.
While purchase costs have fallen for three consecutive weeks after reaching 5.3% in the second week of May, according to Freddie Mac, PMMS has only recently returned and remains high enough to prevent refinancing activity.
The MBA for refinancing applications fell by 6% in the week ending June 3 of the previous week. Compared to the same week a year ago, the index is less than 75%.
The weakness of applications for refinancing and purchases last week reduced the number of mortgage applications. The MBA Market Composite Index fell 6.5%, the lowest level in 22 years.
Continued low housing stocks and a jump in mortgage rates over the past two months have put buying pressure on the market, Kan said, citing a drop in loan applications this week.
“These frustrating affordability challenges are especially difficult for potential buyers at first,” he said.
Reference Source: Housingwire
