Mortgage Application Payments Decline Slightly in September

The Mortgage Bankers Association (MBA) reported on Thursday (10-26-23) that according to its Purchase Applications Payment Index (PAPI)—which measures how new monthly mortgage payments vary across time (relative to income) using data from MBA’s Weekly Applications Survey—homebuyer affordability modestly improved in September. The national medium payment applied for by applications declined from $2,170 in August to $2,155 in September.

An increase in MBA’s PAPI—indicative of declining borrower affordability conditions—means that the mortgage payment to income ratio (PIR) is higher due to increasing application loan amounts, rising mortgage rates, or a decrease in earnings. A decrease in the PAPI—indicative of improving borrower affordability conditions—occurs when loan application amounts decrease, mortgage rates decrease, or earnings increase.

The national PAPI decreased 0.7% to a reading of 173.8 in September, down from 175.0 in August. The decrease was a result of lower typical application amounts dominating higher interest rates. With this decrease, the PAPI is 3.6 points lower than its record level set in May. Median earnings were up 4.5% year-over-year, and while payments increased 11.0%, the strong earnings growth means that the PAPI is up 6.3% on an annual basis.

For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased from $1,444 in August to $1,437 in September.

The Builder’s Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey increased from $2,609 in August to $2,640 in September.