Mortgage payment amounts jump to 8-month high

Rate volatility helped push up monthly mortgage payments in January to their highest mark since last spring, throwing an obstacle to affordability for potential homeowners. 

The median payment on new purchase loan applications came in at $2,205 in January, according to the Mortgage Bankers Association monthly report. The number jumped up from December's $2,127 to land at its highest mark since May. 

The 3.7% increase was also the largest monthly upward move since October, when payment amounts saw a 4.2% jump. The latest median amount was also 3.3% higher from a year ago when it came in at $2,134.

"Homebuyer affordability conditions declined further in January as volatile mortgage rates and high home prices continue to impact many prospective buyers' purchasing power," said Edward Seiler, MBA associate vice president, housing economics, in a press release.

The 30-year conforming rate began December at 6.69%, but signs of a strong economy and political developments pushed it closer toward 7% over the next two months, according to MBA's analysis. The trade group's 30-year rate averaged 6.97% in the final week of January.

At the same time, buyers' expectations of home prices continuing to head higher also came to pass, leading to the increase in cash needed for the monthly mortgage bill. The median purchase loan amount on applications climbed up 1.8% from $319,000 to $324,800 month over month.

MBA's purchase-application payment index, which tracks affordability based on interest rates, loan sizes and household incomes, landed at a reading of 165.9 in January, up 3.3% from 160.8 one month earlier, with a higher number indicating worsening conditions. Altogether, affordability conditions decreased in 40 states, MBA said.

The national score, though, eased off from the previous January's reading of 166.3. 

Still, while current interest rate and price trends currently show little likelihood of moving downward, pent-up demand is leading housing researchers for mortgage volume to grow. 

"Even with persisting affordability challenges, MBA is forecasting for a small increase in purchase originations in 2025, with activity increasing 16% to $2.1 trillion," Seiler said. 

For new constructions, which continue to garner buyer interest with the ongoing dearth of existing homes for sale, median monthly payments rose to $2,531 from $2,500 between December and January. 

The growth in payment amounts could be observed across various borrowing segments, with conventional mortgage applications showing a 4.6% increase to $2,225 from $2,128 in December. Year over year, conventional payments grew by 8.4% from last January's $2,053 median. 

Meanwhile, Federal Housing Administration-backed applications, often used by new buyers for more affordable properties, came in 3.6% higher, rising to $1,934 compared to $1,866 in December. The latest number was 5.8% from $1,830 a year ago.

States with the least affordability continue to be concentrated in the West, with Idaho, Nevada and Arizona posting the top three index scores of 261.8, 254.3 and 218.7, respectively. The PAPI is benchmarked to 100 to reflect affordability conditions immediately following the Great Financial Crisis in March 2012.

The most affordable states were scattered across the country, led by Louisiana, with a PAPI reading of 114.6. Connecticut followed at 123.8, with Alaska in third at 125.9.