Mortgage Credit Conditions Loosen Slightly With ARM Uptick

Mortgage credit saw a modest increase in September, driven by rising demand and availability of adjustable-rate mortgage options.

October 9, 2025

Jordan B.

Mortgage credit access improved in September, with the MCAI rising 0.4% to 104.4.
The increase was led by a broader selection of adjustable-rate mortgages and expanded eligibility guidelines.
Government-backed loans saw the largest credit loosening, while jumbo loan options contracted slightly.
Conforming loan programs gained traction, up 0.7% for the month.

Key Takeaways

Credit Access Hits Four-Month High

Mortgage credit availability increased in September, reports Mortgage Bankers Association (MBA). The Mortgage Credit Availability Index (MCAI) posted a 0.4% monthly gain, reaching its highest level since May.

Line chart showing the Mortgage Credit Availability Index (MCAI) from 2012 to 2025, rising to 104.4 in September 2025.

The improvement reflects broader offerings of adjustable-rate mortgage (ARM) products and looser underwriting standards tied to those loans. ARM demand has been climbing in recent months. Rates on these loans continue to undercut fixed-rate options by a notable margin. According to MBA analysts, the average difference is around 80 basis points.

Segment Breakdown: Government Leads The Way

Four line charts showing Conventional, Government, Conforming, and Jumbo MCAI trends from 2012 to 2025, highlighting changes in mortgage credit availability by loan type.

Credit conditions diverged across different loan types:

Government programs (FHA, VA, USDA) posted the largest increase at +0.8%, pointing to expanded accessibility for lower-down-payment and first-time buyers.
Conventional lending moved only slightly, up 0.1%, with contrasting activity within its components:
- Conforming loan availability increased 0.7%.
- Jumbo loan availability dipped 0.1%, indicating continued caution in the high-balance loan segment.

The MCAI and its subindices serve as a gauge of lending risk and borrower eligibility. An uptick typically signals that lenders are offering more loan options or easing standards to qualify.

Cautious Optimism In Lending

Although the credit landscape improved slightly, overall availability remains relatively tight by historical standards. The MCAI was benchmarked to 100 in 2012. Throughout much of 2025, it has hovered within a narrow range. This stability reflects lender hesitancy amid ongoing economic uncertainty and interest rate volatility.

Line graph showing expanded historical Mortgage Credit Availability Index from 2004 to 2025, illustrating pre- and post-crisis trends.

Joel Kan, MBA’s Deputy Chief Economist, noted that ARMs are becoming more prominent. This is due to their lower rate structure and banks’ sensitivity to short-term funding costs. As long as interest rates remain elevated, ARM offerings could continue to expand.

Looking Ahead

Credit conditions could ease further in coming months if demand for ARMs persists and macroeconomic signals support a more dovish Fed stance. However, high home prices and affordability challenges continue to limit buyer activity. These factors could keep lenders cautious, even as competition increases.

Expect mortgage credit trends to remain closely tied to interest rate dynamics and investor appetite for loan risk through year-end.