Whether or not a borrower is approved for a mortgage is determined in part by credit availability. When credit is loose, borrowers will have an easier time. When it’s tight, borrowers will need to have their finances in order if they hope to get a loan. The Mortgage Bankers Association tracks credit availability with its Mortgage Credit Availability Index. The index measures credit on a scale where any increase indicates credit standards are loosening, while declines mean they have tightened. In September, the index increased to a four-month high. Joel Kan, MBA’s vice president and deputy chief economist, says the improvement was driven by ARM loans. “Mortgage credit availability increased to its highest level in four months, driven by a growing supply of ARM loans, both in terms of more ARM products and broader eligibility requirements,” Kan said. “The ARM share of applications has moved higher recently because ARM loan rates remain around 80 basis points lower than fixed-rate loans. Because bank funding costs are more sensitive to Federal Reserve rate cuts than fixed-rate mortgage rates, it is not surprising to see more ARM offerings.” (source)
