Mortgage credit loosens with jumbos at 5-year high

Mortgage credit is at its loosest in over two years, with availability increasing for the fourth month as more cash-out refinance products were offered, the Mortgage Bankers Association said.

March's Mortgage Credit Availability Index rose 2.5% to 102.5, from 100.4 in February and 93.9 one year ago. The MBA analyzes loan product data from ICE Mortgage Technology to calculate the index, whose baseline of 100 was set to March 2012. Any time the index is below that level, mortgage credit is historically tight.

"Mortgage credit availability increased to its highest level since January 2023, driven by growth in cash-out refinance programs, as recent mortgage rate volatility has opened the door for some borrowers to refinance," said Joel Kan, the MBA's deputy chief economist, in a press release. "The credit supply growth was primarily in conventional programs, with jumbo availability at its highest in five years."

In January 2023, the MCAI was at 103.2.

This month's rise was driven by a 4.7% increase in the conventional portion of the MCAI versus February with just a small offset from a 0.1% decline in the government mortgage segment.

The conventional MCAI is subdivided into two segments, with the jumbo portion rising by 6.6%, and the conforming side virtually unchanged with a 0.2% gain.

"Additionally, [non-qualified mortgage] credit availability continues to grow," Kan said.

Rate lock volume jumped 24% in March versus February, between seasonal growth in the purchase market as well as the increase in refi activity, indicators that the consumer is adapting to the current mortgage rate environment, Optimal Blue's March Market Advantage report said.

"March brought a notable shift in borrower behavior," said Brennan O'Connell, director of data solutions at Optimal Blue, in a press release. "Refinances made up a quarter of all lock activity for the first time in six months, and we saw a clear rise in nonconforming loan share as buyers looked for more flexible options and higher loan amounts."

During March, the 30-year fixed rate remained in a tight range between 6.6% and 6.7%, the Freddie Mac Primary Mortgage Market Survey found. But if rates fall to at least 6.5%, a refi boomlet is likely, the latest ICE Mortgage Monitor said.

The Market Volume Index, which measures lock activity, was 105 for March, which was 11.6% higher than one year prior. Purchase locks increased 20.7% from February but declined by 1.9% versus March 2024.

Cash-out refi volume was 19.9% higher than the prior month and 40.1% above a year ago, while rate-and-term activity was up 51.6% month-to-month and a whopping 178.3% year-over-year.

The pull-through rate for all refis was 63.3%, while for purchases, 82.9% of applications made it through to funding.

Nonconforming rate lock volume, which can include jumbo as well as non-QM loans, made up 16.8% of rate lock volume. That was 130 basis points higher than February and 500 basis points above March 2024.

However, conforming volume, while still more than half of the market at 51%, was 99 basis points lower than one month prior, and 659 basis points less than the same month last year.

The increase in demand for nonconforming loans was responsible for the rise in adjustable rate mortgage locks. These loans were just under 9% of total lock volume in March, according to Optimal Blue, which added it will continue to monitor this data point as consumers look for greater affordability.