Mortgage payments eased in August, but affordability gains were small and uneven

# What happened in August

# Why payments eased The primary driver was smaller median loan sizes. Mortgage rates were still elevated in August, so the payment decline reflects borrowers taking out smaller loans rather than lower interest costs. On a year-over-year basis the median payment is still $62, or 2.9%, higher than in August 2025. Meanwhile earnings rose 4.1% over the same period, leaving the index 1.1% lower year over year.

# Who saw relief and who didn't The change was uneven across loan types and market segments:

• FHA applicants experienced the biggest monthly payment drop: median payment fell $45 to $1,856 and is slightly below last year's $1,863.

# Regional differences Affordability varied widely by state. The least affordable markets by PAPI were:

• Idaho: 258.6
• Nevada: 229.8
• Rhode Island: 213.7

The most affordable markets were the District of Columbia (113.9) and Louisiana (114.2). Index readings for Black, Hispanic, and White households each fell by 0.9 points in August.

# Context: policy and the near-term outlook September 15–16 decision to raise the federal funds rate by 25 basis points to a 3.75%–4.00% target range. That Fed action and subsequent comments about persistent inflation increase the risk that mortgage rates will stay elevated, which would limit the durability of any affordability gains recorded in August.

# Bottom line August delivered a small, short-lived easing in typical mortgage payments, largely because borrowers took smaller loans. Higher rates and uneven market conditions mean many buyers still face strained affordability. For a meaningful improvement, the market will need lower mortgage rates, stronger income gains, or slower home-price growth.