The strictest mortgage credit standards in 9 years

Mortgage companies are reducing the types of mortgages they offer as the housing market contracts.

The availability of mortgage credit has declined, indicating tougher lending standards from lenders, but that doesn’t necessarily mean it’s getting harder to get a mortgage.

The Mortgage Bankers Association reports that its monthly Mortgage Credit Availability Index recorded its largest one-month decline since April 2020 in July, and credit availability is now at the lowest level since May 2013.

This is due to the reduced number of mortgage products, not to growing concerns about the quality of loans.

“Many lenders are seeing a significant reduction in volume. The volume of refinance applications is down 80% from a year ago,” said Mike Fratantoni, chief economist and senior vice president of research at the Mortgage Bankers Association.

“And when demand contracts that much, lenders want to cut spending any way they can. And one way to do that is to simplify loan offers.

Fewer mortgage products do not have a universal impact on all potential borrowers.

“For first-time home buyers, there are still plenty of products out there that really meet their needs. Low down payment, some flexibility with debt to income. All of these are still available,” Fratantoni said.

“Where we’ve seen a credit crunch is in products that are typically used by people looking to refinance or cash out a property. »

There are fewer options for investors looking to borrow to buy property. And, although they are becoming increasingly popular, lenders are reducing the number of different types of variable rate mortgages they offer to just two or three.

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