Mortgage credit loosened in August as lenders added refi products

In August, mortgage credit availability was at its loosest since May, as lenders added refinance programs despite less activity for these loans and jumbo credit availability hit at pandemic-era high, the Mortgage Bankers Association said.

Last month’s Mortgage Credit Availability Index of 123.7 was 3.9% above July's 119.1 and 2.3% over the 120.9 recorded for August 2020. In May, the index reached its COVID-era peak at 129.9.

"Of note, jumbo credit availability increased 9% to its highest level since March 2020, as more non-qualified mortgage jumbo and agency-eligible high-balance loan programs were offered," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "In the conforming space, more lenders offered government-sponsored enterprise refinance programs catered to lower-income borrowers to help reduce their rates and payments."

The MBA's most recent application survey noted that while refis made up nearly two-thirds of the new loan activity for the week ended Sept. 3, the index value was 3% lower than for the prior week. That was the second consecutive week where the refi index declined, after rising two of the three previous weeks in August.

Kan pointed out that according to the MBA's data, the 30-year conforming mortgage was above the 3% level for most of August, a level likely to constrain refinance business.

In the most recent survey, the average interest rate for this loan was 3.03%, unchanged from the previous week and down 3 basis points from the week of Aug. 13. (Freddie Mac reported slightly lower interest rates in August, which remained below 3%.)

The conventional index increased by 7.6% compared with July, with the conforming portion rising by 5.1% and the jumbo segment up 9.4%.

August's government MCAI was up 1.1% compared with July, as lenders added streamlined refinance mortgages for both the Federal Housing Administration and Veterans Affairs programs.