Mortgage lending continues to ease as lower interest rates have led lenders to add cash-out refinance products to their menus, according to the Mortgage Bankers Association.
The mortgage credit supply index was 95 in June, up 1 percent from 94.1 in May but down from 96.6 a year ago.
While the MCAI has risen for six consecutive months, credit conditions remain historically tough: the index has not risen above its benchmark level of 100 since March 2023.
“While recent credit supply growth has been encouraging, the index still hovers near its lowest level since 2012,” deputy chief economist Joel Kang said in a press release. “While the jumbo index has risen to its highest level since August 2022, the conforming and government indexes indicate continuing tight credit conditions, mainly due to weakening industry capacity.”
Optimal Blue's previously released rate lock-in data for June showed that compared to May, both types of refinances increased during the month, with rates and terms increasing by 39% and cash-out activity increasing by 11%.
According to Freddie Mac's Primary Mortgage Market Survey, interest rates on 30-year fixed loans fell from 7.03% on May 30 to 6.86% on June 27. By July 3, they had risen to 6.95%.
Traditional MCAI increased 2% compared to May, while the jumbo component increased 3.1%, offset by a 0.3% decrease in traditional program offerings.
Meanwhile, the government index fell 0.1%.
According to the MBA's Weekly Applications Survey, refinancing activity was slow last week, but that could change going forward.
The yield on the 10-year Treasury note, one of the benchmarks used to price mortgages, fell to 4.17% as of 10 a.m. Thursday as investors reacted to positive inflation news and congressional testimony from Federal Reserve Chairman Jerome Powell.
This is the lowest level in 10 years since 4.17% on March 13.
The MBA calculates the index using loan program data provided by ICE Mortgage Technology.