Mortgage credit availability has been dropping, an indication of tighter lending standards by lenders, but that doesn’t necessarily mean it is getting harder to get a mortgage.
The Mortgage Bankers Association reports its monthly Mortgage Credit Availability Index posted its biggest one-month drop since April 2020 in July, and credit availability is now at the lowest level since May 2013.
This is because of fewer mortgage products, not because of growing concerns about loan quality.
“Many lenders are seeing a tremendous reduction in volume. Refinance application volume is down 80% from last year,” said Mike Fratantoni, chief economist and senior vice president of research at the Mortgage Bankers Association.
“And when demand contracts to that extent, lenders want to reduce expenses any way they can. And one way to do that is to simplify loan offerings.”
Fewer mortgage products are not universally impacting all potential borrowers.
“For first time homebuyers out there, there are still plenty of products that really fit their needs. Low down payment, some flexibility with respect to debt to income. All of those are still available,” Fratantoni said.
“Really where we’ve seen tighter credit is in products that are more typically used by people looking to refinance or to take cash out of a property.”
There are fewer options for investors looking to borrow to buy a property. And, despite becoming more popular, lenders are culling the number of various kinds of adjustable-rate mortgages they are offering to just two or three.