Conventional mortgage credit at highest since 2022

The number of home lending products on offer increased at the start of 2025, boosted by borrowers with strong credit, according to the latest report from the Mortgage Bankers Association.

The MBA's monthly Mortgage Credit Availability Index climbed upward in January for the second month in a row to a reading of 99.0. The number grew 2.5% and comes after an 0.7% rise in December when the index score landed at 96.6.

Year over year, the MCAI also jumped 6.8% from 92.7 in January 2024. As was the case in December, a greater quantity of products aimed at borrowers with healthy financial profiles contributed to the growth in credit, according to Joel Kan, MBA vice president and deputy chief economist. 

"Credit availability increased to start 2025, driven by conventional credit supply rising to its highest level since June 2022," he said in a press release. "There were expanded loan offerings for cash-out refinances, along with more jumbo and non-QM loan programs. Although similar to last month, these were limited to borrowers with better credit."

While the MBA's conventional credit index jumped higher month over month, product availability also rose for government offerings. The conventional MCAI increased 3.8% from December, and the government index saw a 1% uptick, with both moves "a positive development for the spring homebuying season, if these trends continue," Kan continued. 

The jumbo market accounted for much of the surge in conventional loans, with that particular component of the index rising 5.3% from December to another monthslong high. The conforming subindex, meanwhile, inched up by 0.5%. 

Corresponding to the recent growth in cash-out refi products, the Mortgage Bankers Association noted higher interest among borrowers toward the end of last month in its weekly applications survey. 

Although the recent growth in refinance availability is attributed to customers seeking cash-out options, recent analysis from Redfin also points to the potential for an expansion of the customer base in the next three years to include more rate-and-term borrowers. The prediction for interest rates to stay sluggish for the next several months could result in periods of activity reminiscent of summer 2024 when minimal downward movement brought in waves of borrowers seeking cost savings. 

The purchase market looks set to remain challenging throughout much of 2024, though, as home buyers' hopes for lower mortgage rates and home prices are diminishing, Fannie Mae recently reported. 

The MBA's credit index was set at 100 in March 2012 to reflect conditions following the Great Financial Crisis. MBA determines scores through data provided by ICE Mortgage Technology, with lower scores indicative of credit tightening.