US Mortgage Application Payment Index Rises in May

On Thursday, the Mortgage Bankers Association (MBA) reported that homebuyer affordability worsened in May, with the national median payment applied for by purchase applicants increasing to $2,198 from $2,152 in April, 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 rises, while a decrease indicates improving affordability conditions.

The national PAPI rose 2.2% to a reading of 159.4 in May, compared with 156.0 in April. Year-over-year, median earnings rose 4.0%, while payments decreased 0.6%. With stronger earnings growth, the PAPI was down 4.4% from a year earlier, indicating improved affordability.

For borrowers applying for lower-payment mortgages, at the 25th percentile, the national mortgage payment was $1,532 in May, compared with $1,493 in April.

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

“Affordability conditions weakened in May, as rising mortgage rates, combined with increasing loan application amounts, drove mortgage payments higher. The decrease in affordability was widespread, with conditions declining in 33 states. While affordability conditions remain improved compared to a year ago, the monthly increase underscores how sensitive prospective homebuyers remain to changes in interest rates and home prices.”