The Mortgage Bankers Association (MBA) found mortgage applicants’ payments increased in May, indicating a decline in homebuyer affordability as mortgage rates remained near 7 percent.
The national median payment applied for by purchase applicants rose to $2,211 from $2,186 in April, according to MBA’s Purchase Applications Payment Index (PAPI). PAPI uses data from MBA’s Weekly Applications Survey to measure variances in new monthly mortgage payments relative to income.
“Homebuyer affordability declined in May as mortgage rates near 7 percent continued to put upward pressure on prospective homebuyers’ budgets,” said Edward Seiler, MBA’s associate vice president, housing economics, and executive director, Research Institute for Housing America. “Despite current affordability constraints, many homebuyers are still eager to enter the housing market. Rising inventory levels and moderating home-price growth have both been bright spots during this year’s spring homebuying season.”
A PAPI increase generally indicates declining borrower affordability conditions, according to MBA. This means that the mortgage payment-to-income ratio is higher due to increasing application loan amounts, rising mortgage rates or a decrease in earnings.
Conversely, a decrease in the PAPI tends to indicate improving borrower affordability conditions, typically occurring when loan application amounts decrease, mortgage rates decrease or earnings increase.
The national PAPI increased 1 percent to 164.9 in May from 163 in April. Median earnings increased 5.8 percent compared to one year ago. While payments dipped 0.4 percent, the significant earnings growth caused the PAPI to drop (meaning affordability is higher) 5.8 percent on an annual basis. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment increased to $1,512 in May from $1,497 in April.
The Builders’ Purchase Application Payment Index showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey increased to $2,328 in May from $2,306 in April.
Additional key findings MBA highlighted in its PAPI report for May include the following:
- The national median mortgage payment was $2,211— up $25 from April. It is down by $8 from one year ago, equal to a 0.4 percent decrease.
- The national median mortgage payment for Federal Housing Administration loan applicants was $1,927, up from $1,895 in April and up slightly from $1,924 in May last year.
- The national median mortgage payment for conventional loan applicants was $2,235, up from $2,206 in April and up from $2,226 in May 2024.
- The five states with the highest PAPI were: Idaho (260.4), Nevada (247.5), Arizona (224.9), Rhode Island (215.9), and Utah (207.9).
- The five states with the lowest PAPI were: Louisiana (119.6), Connecticut (132.9), Alaska (133.6), New York (134.4) and Iowa (135.8).
- Homebuyer affordability decreased for Black households, with the national PAPI increasing from 160.7 in April to 162.6.
- Homebuyer affordability decreased for Hispanic households, with the national PAPI increasing from 154.5 in April to 156.2.
- Homebuyer affordability decreased for White households, with the national PAPI increasing from 164.7 in April to 166.5.