Mortgage payments kept rising in October

Elevated interest rates are making homes less affordable for borrowers, with a recent Mortgage Bankers Association survey showing that the national monthly home median payment increased by 3.7% in October.

The national numbers illustrate the price buyers might pay if they wait to finance. Specifically, the national median payment grew from $1,941 in September to $2,012 last month, per the tradegroups purchase applications payment index (PAPI).

For borrowers applying for lower-payment mortgages, the national mortgage payment increased to $1,323 from $1,271 in September.

The index — a measure used to gauge affordability conditions — increased 2.7% to 167.9 in October from 163.6 in September, the tradegroup said. In the first 10 months of 2022 the index jumped 36%, and is up 38.1% year-over-year.

An increase in the index is “indicative of declining borrower affordability conditions” and means that the mortgage payment to income ratio is higher due to increasing application loan amounts, rising mortgage rates, or a decrease in earnings, the tradegroup said in its report.

“Prospective homebuyers continued to feel the effects of higher mortgage rates in October, with the 70-basis-point jump in rates leading to the typical monthly mortgage payment rising to a new survey high of $2,012,”  Edward Seiler, associate vice president of housing economics at the MBA, said in a statement. “Higher mortgage rates are also squeezing the purchasing power of prospective buyers. Weakening affordability and increased economic uncertainty are expected to slow home buying activity in the final two months of the year.”  

MBA’s national mortgage payment to rent ratio also slightly increased by 1.5% on a quarterly basis to $1,334 from $1,314 in the second quarter. 

“Median asking rents increased at an annualized 6.2 percent between the second and third quarters of 2022, but have shown some deceleration in recent months,” added Seiler. ” Despite the increasing mortgage rates in the third quarter, elevated rental payments kept the MPRR under one for many potential first-time homebuyers who may be looking for a smaller mortgage amount.”