Mortgage credit availability contracted in April, reversing gains made in March that had pushed mortgage access to its highest level since August 2022.

Data published Tuesday by the Mortgage Bankers Association (MBA) revealed the Mortgage Credit Availability Index (MCAI) fell 0.4% last month, ending three consecutive months of index growth. The MCAI had risen 1.1% from February to March.

“Offsetting some of the April decline was a small increase in non-QM programs, a segment of the market that continues to grow,” said Joel Kan, deputy chief economist of the MBA, referring to non-qualified mortgage products that do not meet the underwriting requirements for Fannie Mae, Freddie Mac or other government-backed mortgage lending.

Kan also noted in a statement that although overall credit availability “remains tight by historical standards,” mortgage qualification and origination activity has “recently been impacted by mortgage rates, housing inventory and the economic environment.”

Average mortgage rates for typical 30-year home loans have risen from around 6% before the Iran war started on Feb. 28 to between 6.3% and 6.5% over the 10 weeks since. Inflationary impacts of the conflict, amid ongoing economic fallout, have established a higher floor for mortgage rates through the rest of the year, experts tell Scotsman Guide.

The MCAI represents an aggregate measure of consumer access to mortgage financing, calculated using variables related to borrower eligibility like credit scores and loan-to-value ratios, as well as loan types offered by lenders.

A decline in the index, which analyzes data from ICE Mortgage Technology, signals that lending standards are tightening, while an increase indicates loosening credit access.

Several of the component indexes that boosted credit access in March gave back gains and thereby dragged the overall index lower in April. Kan noted in particular that lenders “tightened up on conventional loan programs.”

Growth of 0.6% in March for the conventional component index, which tracks credit access for Fannie Mae- and Freddie Mac-eligible loans, declined 0.6% in April. The jumbo index declined 1% after rising 0.8% in March, reflecting tightening credit availability for borrowers seeking loans higher than the conforming mortgage limits set by Fannie and Freddie.

The component index tracking access to government mortgage programs — including those insured by the Federal Housing Administration, U.S. Department of Agriculture and Department of Veterans Affairs — was unchanged in April after jumping 1.7% the previous month.