Mortgage lenders loosen credit but are weary for the future

Loan product offerings increased for the fourth month in a row, but the muted change from March means that lenders are still not certain better times are ahead, the Mortgage Bankers Association said.

The Mortgage Credit Availability Index was 94 in April, compared with 93.9 in March and 99.6 one year ago. Any time the index is under 100, it means credit is tighter than it was in March 2012, when the industry was still dealing with the fallout from the financial crisis.

"Lenders continue to reduce capacity with mortgage rates still above 7% and origination volume moving at a slow pace," Joel Kan, the MBA's deputy chief economist, said in a press release. "Even with challenging affordability conditions and fairly strong housing demand, credit remains tight and housing supply low."

While some claim consumers are finally accepting higher mortgage rates and moving ahead with their home searches, others are more bearish on the current Spring home purchase season.

The MBA's own April forecast revised the purchase outlook downward for the final three quarters of the year downward — including in the current period to $346 billion from March's $408 billion and for the third quarter to $392 billion from $431 billion.

The Freddie Mac Primary Mortgage Market Survey from May 2 put the 30-year fixed rate mortgage at 7.22%, tying a high point from last November.

That same day, LenderPrice data posted on the National Mortgage News website was at 7.36%.

But the 10-year yield has been sliding since it hit a peak of 4.69% on April 30 and it was down to 4.42% at noon on May 7. This contributed to a 30-basis-point drop since last Thursday in the 30-year FRM to 7.06%, the LenderPrice data at noon on Tuesday showed.

The conventional portion of the MCAI rose 0.3% compared with March, with both the jumbo and conforming component indices increasing by a similar amount.

Meanwhile the government MCAI was flat, with a very minimal decrease, MBA said. The index is calculated using data from ICE Mortgage Technology.

Fannie Mae's Home Purchase Sentiment Index was unchanged at 71.9% in April, with those consumers stating it's a good time to buy a home falling one percentage to 20% compared with March.

The plurality of respondents, 40% (a 4 percentage point increase from March) think rates will stay the same over the next 12 months. Most of that shift came from the 3 percentage point decline of those that believe they will go down, 26%, while 33% think they will rise, a 1 percentage point drop.

The HPSI hit another plateau in April as consumers maintain a "wait and see" approach, said Doug Duncan, Fannie Mae chief economist, in a press release.

"Overall, housing sentiment increased from November through February, driven largely by consumer belief that mortgage rates would move lower," said Duncan.

"However, recent data showing stickier-than-expected inflation, rising mortgage rates, and continued home price appreciation appear to have given consumers pause regarding the market's direction."