Mortgage Payments Decline Further in December

The Mortgage Bankers Association (MBA) reported on Thursday (1-26-23) 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 (WAS), homebuyer affordability improved in December. The national median payment applied for by applicants dropped 2.9% to $1,920 from $1,977 in November.

MBA notes that this month’s release includes a new dataset on applications for newly built single-family homes derived from MBA’s Builder Application Survey (BAS) data: the Builders’ Purchase Application Payment Index (BPAPI).

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 2.9% to a reading of 159.5 in December, down from a reading of 164.2 in November—a further decline since a series high in October 2022. Year-over-year, the index has jumped 38.8%. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased to $1,279 in December, down from $1,289 in November.