Mortgage credit declined sharply in November, with government indices reaching their lowest levels since 2012 according to updated figures from the Mortgage Bankers Association (MBA).
Falling 3.3% to 95.9, November marks the fifth consecutive month of declines in the MBA’s Mortgage Credit Availability Index (MCAI), which analyzes data from ICE Mortgage Technology.
Lackluster interest from investors for loans with high loan-to-value (LTV) ratios and low credit scores, “as well as further exits from the broker channel in an originations market that is still challenging for many lenders,” were cited by the MBA as accelerants of November’s drop-off.
The Conventional MCAI decreased by 2.7%, while the Government MCAI decreased by 3.9%. Of the component indices of the Conventional MCAI, the Jumbo MCAI decreased by 0.9%, and the Conforming MCAI fell by 6.6%.
A decline in the MCAI indicates that lending standards are tightening, while increases in the index indicate loosening credit. The index was benchmarked to 100 in March 2012.
Mortgage credit availability hit a paltry two-year peak in August as mortgage rates that fell consistently over the summer boosted Non-QM originations and cash-out refinances.
Post-presidential election, signs of rising homebuyer demand have held steady in recent weeks, despite a prohibitively expensive market for many home shoppers.
Industry forecasts that home prices are entering a period of sustained deceleration could help more homebuyers qualify for mortgages.
“As we continue to bump along during this slower time of the year for the housing market, home prices are not expected to reveal much about what’s ahead for the spring home buying market,” CoreLogic Chief Economist Selma Hepp said earlier this week.
With mortgage demand bottlenecked among first-time homebuyers and renters stuck renting, declining availability of mortgage credit does not bode well for lenders and originators who are eager — but anxious — to turn things around in 2025, and must solve for affordability to do so.
Multiple years of rising housing costs — from elevated mortgage rates to rapid home price gains to increased home insurance and property tax rates — have left many sidelined borrowers hunting for homes for more than a year.
Most mortgage industry analysts expect mortgage rates to end 2025 in the low 6s, keeping affordability at the forefront of lenders’ minds, their eyes on the December 18-19 Federal Reserve meeting next week.
Updated employment figures published last Friday by the Labor Department offered “mixed signals,” says senior economist at First American, Sam Williamson, on the Fed’s next move.
