US Mortgage Application Payment Index Falls in August

On Thursday, the Mortgage Bankers Association (MBA) reported that homebuyer affordability improved in August, with the national median payment applied for by purchase applicants decreasing to $2,162 from $2,175 in July, according to its Purchase Applications Payment Index (PAPI).

The PAPI measures how new monthly mortgage payments vary over time relative to income, using data from MBA’s Weekly Applications Survey. An increase in the index signals worsening borrower affordability as the mortgage payment-to-income ratio (PIR) rises, while a decrease indicates improving affordability conditions.

The national PAPI declined 0.6% to a reading of 154.3 in August, compared with 155.2 in July. Year-over-year, median earnings rose 4.1%, while payments increased 2.9%. With earnings growth outpacing payment growth, the PAPI was down 1.1% from a year earlier, indicating improved affordability.

For borrowers applying for lower-payment mortgages, at the 25th percentile, the national mortgage payment was $1,492 in August, compared with $1,512 in July.

Commenting on the report, MBA Associate Vice President of Housing Economics and Executive Director of the Research Institute for Housing America Edward Seiler said:

“Homebuyer affordability improved slightly in August, as a decline in the median purchase loan amount helped offset the impact of higher mortgage rates. Affordability also improved compared to a year ago as earnings growth outpaced the increase in mortgage payments. However, conditions remain challenging, with 27 states seeing affordability decline in August. Looking ahead, meaningful and sustained improvements in affordability will depend on a combination of lower mortgage rates, continued income growth, and moderating home-price growth.”