Mortgage credit availability rebounded sharply in July, reaching its highest level in four years after falling to a six-month low in June, the Mortgage Bankers Association (MBA) reported Tuesday.

The increase was driven largely by expanded adjustable-rate mortgage (ARM) and streamline refinance loan programs, the trade group’s deputy chief economist, Joel Kan, explained in a press release. He noted that nonconforming programs also broadened last month.

“Jumbo credit availability has grown in almost every month this year and this month’s increase brought the jumbo index to its highest level since 2020,” said Kan. “Additionally, non-QM loan programs continue to account for a substantial share of this growth.”

Non-qualified mortgage (non-QM) loans do not conform to so-called “agency” guidelines for loans eligible for purchase by Fannie Mae, Freddie Mac and Ginnie Mae.

Amid persistent affordability barriers, greater flexibility in non-QM underwriting has supported steady growth in non-QM origination share in recent quarters.

The MBA’s Mortgage Credit Availability Index (MCAI), which tracks changes in credit underwriting conditions, reversed June’s 2% decline to post 2.5% growth in July. It reached 108.4, its highest level since July 2022.

The index measures consumer access to mortgage financing, based on factors including credit score and loan-to-value ratios relative to the variety of loan programs and structures actively offered by lenders. Using data from ICE Mortgage Technology, the MCAI rises when lending conditions loosen and falls when they tighten.

The conventional component index, which tracks credit access for loans that meet Fannie and Freddie underwriting guidelines, rose 3% in July after sliding 0.1% the previous month. After declining 4.6% in June, the government component index increased 1.8% in July.

Within the conventional index, credit availability for jumbo mortgages that exceed conforming loan limits rose 4.2% in July, compared to a 0.2% decline in the conforming component index.

Average rates on 30-year mortgages increased for four consecutive weeks in July, reaching a one-year high of 6.81% by the end of the month. Average 30-year rates were 6.1% as of late February, just before the Iran war began, per MBA data.