More mortgage credit becomes available in response to higher rates

Mortgage credit availability loosened in December as lenders added programs to assist consumers facing rising interest rates and decreased housing affordability, the Mortgage Bankers Association found.

Its Mortgage Credit Availability Index rose by 0.8% in December to 125.9 from November's 124.9. This is the highest the MCAI has been sincelast May but credit availability remains 30% below pre-pandemic levels, Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release.

“December's growth was driven by more adjustable-rate mortgage and lower credit score loan programs, which was likely due to a combination of the rising rate environment and affordability challenges," Kan said. "Additionally, there was an increase in government streamline refinance programs to aid borrowers still looking to refinance before rates rise even more."

By investor type, the conventional MCAI increased 0.8% from November, while the government MCAI — which measures Federal Housing Administration, Veterans Affairs and U.S. Department of Agriculture/Rural Housing Service lending programs — rose by 0.7%.

The conforming component of the conventional index rose 1.1%, while the jumbo segment was up 0.6%.

"The overall supply of mortgage credit only grew around 3% compared to the same month a year ago, with a 34% increase in jumbo credit availability contributing to most of that growth," Kan said. "Government credit supply, as well as conforming credit, saw tightening last year." In December 2020, the MCAI was 122.1.

Still, in the second half of 2021, mortgage lenders loosened their credit offerings in every month except November.

The MCAI is benchmarked at 100 representing credit conditions in March 2012, and is calculated by the MBA using loan program data from Ellie Mae's AllRegs Market Clarity tool.