Yahoo Finance It hasn’t been this hard for homebuyers to get a mortgage since 2013
Getting a mortgage hasn’t been this tough in a decade, as lenders lose their appetite for riskier loans after this spring’s banking turmoil.
An index measuring overall mortgage availability slid for the third month in a row to the lowest level since January 2013, according to data released this week by the Mortgage Bankers Association (MBA).
The index gauging availability for government-backed home loans — which attract entry-level buyers of modest means — also decreased to the lowest point since January 2013. The one measuring availability for conforming mortgages — those guaranteed by Fannie Mae and Freddie Mac — dropped to the lowest level in the series' history dating back to 2011.
The reticence from lenders is a tough blow for buyers, especially first-time ones, who are already facing a supply-starved market and elevated mortgage rates.
“In a market where a significant share of demand is expected to come from first-time homebuyers, the depressed supply of government credit is particularly significant,” MBA Deputy Chief Economist Joel Kan said in a statement.
In particular, lenders shied away from home loans for buyers with lower down payments and lower credit scores, Kan noted. These are often characteristics of first-time homebuyers, who were supposed to get a bit of a boost starting this month when Fannie Mae and Freddie Mac changed the risk-based fees that lenders follow.
Under the changes, some higher-risk borrowers — those who put down smaller down payments or had lower credit scores — saw a reduction in fees versus the old pricing model.
Now those same borrowers are facing tighter availability, though Kan told Yahoo Finance the new repricing model is unrelated to that pullback.
Stricter lending standards, though, add to the current trifecta of challenges buyers are dealing with: elevated mortgage rates, high home prices, and a dearth of options.
Home prices have ticked back up this spring, after softening since mid-2022, and mortgage rates remain near 7%, crushing affordability.
For instance, the monthly mortgage payment on the median asking price hit a record high of $2,651 when rates reached 6.79% earlier this month, according to Redfin. That’s up 14%, or $320 per month, from a year ago.
“Affordability is a real challenge,” Keith Gumbinger, vice president of HSH.com, told Yahoo Finance.
According to Daryl Fairweather, Redfin's chief economist, increasing supply is the only long-term solution to salvage homebuyer affordability.
“When market rates come back down, prices will go right back up,” Fairweather said. “We need more supply. It’s really the only thing holding back buyers.”
Higher rates have kept many potential move-up buyers reluctant to sell their current home and lose their existing low mortgage rate.
New listings of homes for sale fell 25% year over year to their lowest level on record in the four weeks leading to June 4. That kept the total share of homes on the market down 5% from a year prior during that period, according to Redfin.
“Those with affordability issues can try and offer a larger down payment. There are ways to manipulate your way through and at least preserve your opportunity to participate in this market,” Gumbinger said. “But it doesn’t matter if there’s nothing to buy.”
Gabriella Cruz is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.
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