US Mortgage Application Payments Trend Higher in February

On Thursday, the Mortgage Bankers Association (MBA) reported that 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—shows homebuyer affordability declined in February. The national medium payment applied for by applicants increased 2.4%, from $2,134 in January to $2,184 in February.

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 rose 2.4% to a reading of 170.7, up from 166.8 in January. Median earnings were up 4.8% year-over-year, and while payments increased 6.0%, the strong earnings growth means that the PAPI is up 1.1% on an annual basis.

For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment increased to $1,438 in February, up from $1,438 in January.

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 $2,501 in January to $2,534 in February.