Mortgage Application Payments Move Lower in December

On Thursday, the Mortgage Bankers Association (MBA) reported 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 improved in December. The national medium payment applied for by applications fell from $2,137 in November to $2,055 in December.

An increase in the 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 fell 3.8% to a reading of 161.8 in December, down from 168.2 in November. With this decrease, the PAPI is now at the lowest level since January 2023. Median earning were up 5.5% year-over-year, and while payments increased 7.1%, the strong earnings growth means that the PAPI is up 1.4% on an annual basis.

For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased from $1,425 in November to $1,375 in December.

The Builder’s Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey decreased from $2,597 in November to $2,541 in December.