Mortgage Payments Declined for Second Consecutive Month in July

The Mortgage Bankers Association (MBA) reported on Thursday (8-25-22) 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 for the second consecutive month in July, with the national median payment applied for by applicants down to $1,844 from $1,893 in June.

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 3.8% to a reading of 157.7 in July, down from June’s reading of 163.9, meaning payments on new mortgages take up a smaller share of a typical person’s income. Compared to July 2021 (116.6), the index has jumped 35.2%. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment declined between June and July of 2022, from $1,241 to $1,210.