Mortgage Application Payments Trend Lower in July

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 July. The national medium payment applied for by applications declined from $2,167 in June to $2,140 in July.

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 1.9% to a reading of 167.7 in July, down from 170.9 in June. Year-over-year, median earnings were up 2.9%, and while payments decreased 1.0%, the moderate earnings growth means that the PAPI is down 3.8% on an annual basis.

For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased to $1,444 in July from $1,460 in June.

The Builders’ Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey decreased to $2,452 in July from $2,510 in June.