The latest figures from the Mortgage Bankers Association’s Mortgage Credit Availability Index (MCAI) showed a slight improvement in mortgage availability in August, driven by an increase in the MBA’s conventional index.

Overall, the MCAI rose by 0.1% to 104 last month. The Conventional MCAI increased 0.3% while the Government MCAI decreased by 0.1%. The Conforming MCAI, which is a component of the conventional index limited to mortgages meeting Fannie Mae and Freddie Mac’s conforming loan limits, rose 0.7%.

A decline in the MCAI indicates lending standards are tightening, while increases in the index are indicative of loosening credit. The MBA attributed the August improvement to increased adjustable-rate mortgage (ARM) offerings.

“With mortgage rates declining, and some renewed application activity for both purchases and refinances, the demand for ARM loans has increased somewhat,” noted Joel Kan, senior vice president and deputy chief economist at the MBA, “although the overall level of ARM applications remains close to historically low levels.”

Easing mortgage rates in recent weeks led ARM applications to rise to nearly 10% of applications for the week ending Sept. 5, according to the MBA’s weekly survey of mortgage applications. The average rate for 5/1 ARMs decreased to 5.77% from 5.9% that week, considerably lower than fixed-rate loans.

Kan also noted in a press release that mortgage lenders have largely stabilized capacity in their adjustment to lower loan volumes since the latter half of 2022.

“Combined with recent economic uncertainty, those factors continue to keep credit supply relatively low,” he concluded.