Smart Borrower Blog

Mortgage Credit Loosens But Confidence Falls

Aug 22nd, 2018 @ 2:09 PM by Amber Nelson

Rising home prices and mortgage interest rates have prompted lenders to loosen their credit standards, but those same factors have caused Americans to feel less confident that now is a good time to buy a home.

The Mortgage Bankers Association’s Mortgage Credit Availability Index rose to 184.1% in July, up 1.7% from June. An increase in the index indicated looser credit requirements while a decrease represents a tightening of credit.

“Credit availability continued to expand, driven by an increase in conventional credit supply,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “More than half of the programs added were for jumbo loans, pushing the jumbo index to its fourth straight increase, and to its highest level since we started collecting these data. There was also continued growth in the conforming non-jumbo space, which reached its highest level since October 2013.”

Even as jumbo and conforming loans saw looser mortgage credit, government loan credit availability declined by 0.4%.

And as home prices continued to climb in July, Americans’ confidence fell in the housing market. The Fannie Mae Home Sentiment Index dropped to 86.5 in July, down 4.2% from June. The segment of survey respondents who said now is a good time to buy decreased 4% while the share of those who think now is a good time to sell fell 6%.

“Home purchase sentiment seems to have reached a plateau, with potential home sellers likely struggling to find a home to buy amid slow supply growth, expectations for rising mortgage rates, and significant home price increases,” said Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae. “Survey respondents cite ‘high home prices’ as the top reason why it is both a good time to sell a home and bad time to buy a home. This suggests a contributing factor to the low supply of existing homes for sale is that current owners are reluctant to trade up in a rising price market. Additionally, the shares of consumers citing favorable mortgage rates as a reason why it’s a good time to buy or sell a home both dropped to fresh survey lows.”

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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