An update to the Mortgage Bankers Association’s Mortgage Credit Availability Index (MCAI) shows mortgage availability broadly increased in January, fueled by expanded offerings for cash-out refinances, adjustable-rate mortgages (ARMs) and jumbo loans.

The MCAI rose 1.1% over the month to land at 105.9 in January, roughly 7% higher than one year ago. A decline in the index, which analyzes data from ICE Mortgage Technology, signals that lending standards are tightening, while an increase indicates a loosening of credit.

Early measures of January mortgage activity indicate a jump in refinance volumes as mortgage rates dipped early in the month, while pockets of credit weakness continued to impact government mortgage performance.

“The beginning of the year is typically when lenders start to position themselves for the spring homebuying pick up, and recent dips in mortgage rates have provided windows of refinance opportunities, including refinances into ARM loans,” noted Joel Kan, deputy chief economist of the MBA, in a statement accompanying Tuesday’s update to the MCAI.

Kan also noted that most of the monthly expansion in mortgage credit availability occurred among loan programs that “require lower [loan-to-value ratios] and higher credit scores.”

Mortgage credit availability remains historically tight, though the MCAI recovered the decline of 2.6% it posted in December, which had pushed the index to its lowest level in three months.

While all component indexes fell in December, the drop was amplified by a sharp contraction in the conforming index, which tracks loans that meet the guidelines and loan limits of Fannie Mae and Freddie Mac. That index fell in December to its lowest level since the MBA began tracking the statistic in 2011.

The conforming index remained unchanged near those record-low levels in January, while the remaining component indexes showed varying degrees of growth.

The conventional component index, which tracks non-government loan programs, had reached its highest levels since 2020 in November. It reversed a 3.6% monthly drop in December with 2.1% growth in January.

The jumbo loan index, which tracks loan programs with lending thresholds that exceed the conforming loan limits set by Fannie and Freddie, increased by 2.9% after sliding 3.6% in December.

The government index, which tracks credit availability for mortgages backed by the Federal Housing Administration, Department of Veteran Affairs and U.S. Department of Agriculture, struggled to reverse December’s 1.4% decline, rising just 0.1% over the month in January.