Mortgage applicants get slight reprieve from steep loan payments

New mortgages take up smaller share of borrower's income

Mortgage applicants get slight reprieve from steep loan payments

Affordability conditions improved modestly in July, giving homebuyers a reprieve from high mortgage rates and home prices.

The national median payment applied for by applicants fell for the second straight month in July, down slightly to $1,844 from $1,893 in June, according to data from the Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI).

Edward Seiler, MBA’s associate vice president of housing economics, cited “slightly lower mortgage rates and a decrease in the median loan amount” as the main drivers of the decline, leading to the typical homebuyer’s mortgage payment falling by $49 from June.

“Homebuyer demand has faltered this summer, as lingering economic uncertainty, high inflation, and still-high mortgage rates caused many prospective buyers to delay their home search,” Seiler said. “The combination of a strong job market and moderating home-price growth could entice some of these buyers to return in the coming months.”

Read more: New home purchase applications stalled by economic uncertainty

The national PAPI dropped 3.8% last month to a reading of 157.7, meaning payments on new mortgages take up a smaller share of a typical person’s income. The index is 35.2% higher than last year’s 116.6 reading. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased by $31 month over month to $1,210.

MBA’s national mortgage payment to rent ratio (MPRR) climbed from 1.38 in the first quarter to 1.44 in the second quarter, meaning mortgage payments for home purchases have increased relative to rents. The national median asking rent increased 4.7% quarter over quarter to $1,314, and the 25th percentile mortgage application payment to median asking rent ratio was 0.94 in June, up from 0.90 in March.

“Rent growth has remained incredibly strong in recent quarters, but the influx of new developments coming on to the market should alleviate some of the affordability pressures that are affecting renters in many parts of the country,” Seiler said.