How does the increase in mortgage payment fare relative to income?
The national median payment for mortgage applications rose 8.3% to $1,653 in February – a $127 leap from January, according to the Mortgage Bankers Association (MBA).
MBA’s Purchase Applications Payment Index (PAPI) measures how new monthly mortgage payments change across time and how they fare relative to income.
In spite of the improved income growth, Edward Seiler, associate vice president and executive director at the MBA, said it still wasn’t fast enough to keep pace with rising house prices and mortgage rates.
“Low unemployment has spurred strong income growth in early 2022, but homebuyer affordability has decreased due to the quick rise in mortgage rates amid steep home-price growth,” Seiler said. “The 30-year fixed-rate mortgage spiked 73 basis points from December 2021 through February 2022. Together with increased loan application amounts, a mortgage applicant’s median principal and interest payment in February jumped $127 from January and $337 from one year ago.”
The national PAPI increased 8.3% to 146.3 in February from 135.1 in January, meaning payments on new mortgages took up a larger share of a person’s income. The figures jumped 21.9% higher compared to the same period in 2021.
Across the states, Idaho, Nevada and Arizona had the highest PAPI scores above 190, while Washington, Connecticut and Alaska had the lowest below 95.
Moreover, borrowers looking to apply for lower-payment mortgages in the 25th percentile are now faced with a 9.8% increase to $1,094 from $996 in January.
Seiler said rent prices also continued to move faster than mortgage payments, with the median asking rent at $1,207 by Q4 2021. The current mortgage payment to rent ratio increased 0.01 last December and 1.01 in December 2020.
“Asking rents from first-quarter 2020 to fourth-quarter 2021 increased 16%, even outpacing the steep growth in mortgage application payments over that period,” Seiler said. “MBA’s mortgage payment to rent ratio is now at roughly the same level it was at the start of the COVID-19 pandemic in March 2020.”