Mortgage credit availability tightened in September, and the demand from home buyers has since followed suit.
The Mortgage Bankers Association’s (MBA) Mortgage Credit Availability Index (MCAI) decreased 0.5% month over month to 98.5. The Conventional MCAI decreased by 1.7%, while the Government MCAI increased by 0.8%.
“Mortgage credit availability tightened slightly in September as lenders remained cautious in this uncertain economic environment,” MBA’s Vice President and Deputy Chief Economist Joel Kan said. “There was a decline in loan programs for cash-out refinances, jumbo, and Non-QM loans, including loans that require less than full documentation. Most component indexes decreased over the month, but the government index increased, driven by more offerings of VA streamline refinances.”
Some home buyers have stayed on the market sidelines into October, and the MBA reported a 17% drop in mortgage applications the week ending Oct. 11, according to its Weekly Applications Survey.
The Refinance Index decreased 26% from the previous week, but was still significantly higher year over year, at 111% above the same week in 2023. The seasonally adjusted Purchase Index decreased 7% from one week earlier, while the unadjusted index was 7% higher YOY.
“Mortgage rates moved higher for the third consecutive week, with the 30-year fixed rate increasing to 6.52%, its highest level since August,” Kan pointed out. “The recent uptick in rates has put a damper on applications. Demand is holding up to an extent for prospective first-time buyers. FHA purchase applications were little changed despite the increase in rates, as some first-time homebuyers remain in the market because of improving housing inventory conditions.”
Researchers from Realtor.com forecasted rates to stay in the low 6% range through the end of this year, with further declines potentially reaching the high 5% range by next Spring. This should encourage more buyers to come off the sidelines and into the market.
Among total mortgage applications submitted the week ending Oct. 11, the refinance share decreased to 46.5% from 52.4% the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.9% of total applications. The FHA share decreased to 15.9% from 16.2% the week prior. The VA share decreased to 16.2% from 16.9% the week prior.
