Banks Slightly Let Up on Mortgage Lending Standards
Banks loosened mortgage lending standards in October for the first time since July, slightly easing what has been a very tight credit market during the COVID-19 pandemic, says a new report from the Mortgage Bankers Association (MBA).
The Mortgage Credit Availability Index, which indicates looser lending standards the higher it climbs, rose 2.3% in October, the first increase since it showed a slight blip upwards in July. It fell 26% in the first two months of the pandemic and has been hovering near lows not seen since 2014.
“The ongoing economic recovery and improving labor market led to a rise in credit supply for various loan types,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a press release. “Despite October’s slight turnaround, credit availability remains constrained.”
The tight credit market has created some headwind for residential real estate sales. Economists have warned that strict lending standards have been particularly troublesome for entry-level buyers, exacerbating inequalities in a housing market that is increasingly divided between the haves and the have-nots. To make matters tougher for less well-off homebuyers, median housing prices have also been surging during the pandemic.