Spring homebuyers feel the heat of rising mortgage application costs

“The start of the spring homebuying season is off to a mixed start. The healthy labor market and robust wage gains fueled demand throughout the country in March, but rapid home-price growth and the 42-basis-point surge in mortgage rates last month slowed purchase application activity. A typical borrower’s principal and interest payment was $387 more than in March 2021,” said Seiler.

For borrowers applying for lower-income mortgages (the 25th percentile), the national home loan payment grew 3.2% to $1,129 in March.

Mortgage payments for home purchases have also increased relative to rents. MBA’s national mortgage payment to rent ratio (MPRR) soared to its highest level since 2010, up from 1.32 in February to 1.38 in March. The national median asking rent increased 4% quarter over quarter to $1,255 in Q1 2022. The 25th percentile mortgage application payment to median asking rent ratio was 0.90 in March, up from 0.87 the month before.

“Swift price appreciation, sky-high inflation, low inventory, and mortgage rates now two percentage points higher than last year are all headwinds for the housing market in the coming months – especially for first-time buyers,” Seiler said. “MBA’s updated forecast calls for an annual decline in existing sales, higher home prices and mortgage rates, and a smaller but solid 4% gain in purchase origination volume.”