How a run-up in Treasury yields sent mortgage affordability plunging

A homebuyer retreat in late summer was fueled by renewed payment shocks, the latest MBA data suggests

How a run-up in Treasury yields sent mortgage affordability plunging

A homebuyer retreat in late summer was fueled by renewed payment shocks, the latest MBA data suggests
How a runup in Treasury yields in September sent mortgage payments soaring

Homebuying affordability declined sharply in September as higher mortgage rates drove up new purchase mortgage payments, the housing finance industry’s largest trade group said Thursday.

The national median purchase payment applied for in September was $2,215, an increase of $53 from August and a $148 gain from 12 months ago. The 2.5% monthly rise reversed three straight months of easing payments.

“Compared to a year ago, mortgage payments are up more than 7%, outpacing earnings growth and adding to the affordability challenges facing prospective homebuyers,” commented Edward Seiler, vice president of housing economics at the MBA.

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The association’s Purchase Applications Payment Index (PAPI), which tracks how new monthly mortgage payments change relative to income, was about 3.1% higher annually in September. Growth in the index indicates weaker affordability.

Application data for purchases of newly built homes showed median new-home mortgage payments rose more than 4% to $2,307 in September.

Inflation pressures and surging government bond yields drove average mortgage rates for typical 30-year home loans from about 6.8% through all of August to 7.5% by the end September, according to MBA data.

The surge was largely fueled by a run-up in yields on 10-year U.S. Treasury notes, which are used as an industry-wide benchmark for 30-year mortgage rates. Yields on the 10-year opened September at 4.75% and closed the month at 5.3%.

Purchasing power and mortgage demand subsequently retreated in lockstep last month. Government yields have since come down from recent peaks, with the 10-year spending the past week just under 5%.

“Despite a slight decline in the median loan amount, higher mortgage rates drove monthly payments upward, with affordability deteriorating in 39 states,” added Seiler in the MBA report.

President Donald Trump signed an executive order last week directly targeting mortgage costs in an attempt to ease housing affordability pressures. Industry groups applauded the order’s various gestures ahead of what experts say will be a busy legislative calendar for the industry in 2027.

The median mortgage payment for conventional mortgage applicants seeking loans underwritten to Fannie Mae and Freddie Mac guidelines was $2,244 in September, the MBA reported, about 6.6% above year-ago levels and 2.5% higher than August.

New payments for mortgages insured by the Federal Housing Administration were 6.3% higher over the year at $1,906, up 2.7% from August. Louisiana, Connecticut, West Virginia, Alaska and Iowa had the lowest state-level PAPIs in September, reflecting the best relative affordability.

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