Homebuyer affordability improved in July, as the national median mortgage payment applied for by purchase applicants decreased to $2,127, down from $2,172 in June, according to the Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI).
The index measures how new monthly mortgage payments vary across time – relative to income – using data from MBA’s Weekly Applications Survey (WAS).
The index decreased 3.0% in July to a score of 158.7, down from a score of 163.7 in June.
An increase in the index score is indicative of declining borrower affordability conditions. It 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 index score is indicative of improving borrower affordability conditions – and occurs when loan application amounts decrease, mortgage rates decrease or earnings increase.
Median earnings were up 3.7% in July compared with July 2024, and while payments decreased 0.6%, the significant earnings growth means that the PAPI is down (affordability is higher) 4.1% on an annual basis.
For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased to $1,468 in July from $1,500 in June.
“Affordability conditions have now improved for two consecutive months, the result of lower mortgage rates and continued strong income growth,” says Edward Seiler, associate vice president, housing economics, and executive director, Research Institute for Housing America, in a statement. “MBA is forecasting that mortgage rates will remain in the 6.5 percent to 7 percent range for the rest of 2025. While still elevated, continued income growth and softening home-price gains should boost prospective buyers’ purchasing power in the months ahead.”
Photo: Dillon Kydd