Mortgage Payments Held Steady in July

The Mortgage Bankers Association (MBA) reported on Thursday (8-24-23) 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 in July was unchanged from June, with the national median payment applied for by purchase applicants remaining at $2,162.

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 0.9% to a reading of 175.6 in July, down from a reading of 177.2 in June and 177.4 in May. The MBA notes that while the PAPI declined slightly in July, it still remains at an elevated level. Median earnings were up 3.7% compared to one year ago, while payments increased by 17.2%. The strong earnings growth means that the PAPI is up 13.0% year-over-year.

For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased in July to $1,451, down from $1,459 in June and $1,462 in May.

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 $2,520 in June to $2,426 in July.