A 6.81% mortgage-rate stress test cuts 36% of June's affordability gain, not all of it

By Cumulant Research | August 6, 2026

The modeled year-over-year improvement survives. Substituting MBA's 6.81% contract ratecontract rateThe contract rate is the interest rate written on the mortgage note before points are incorporated into an estimated overall borrowing cost. [MBA](https://www.mba.org/docs/default-source/research-and-forecasts/res-sample-documents/res_sf_wasfaq.pdf?sfvrsn=36976594_1) directly for NAR's 6.57% June rate, while leaving the June home price and inferred family income unchanged, lowers the affordability index from its official 102.3 reading to about 99.8. That is below NAR's benchmark of 100 but above the 95.5 index reported for June 2025. [NAR June release](https://www.nar.realtor/newsroom/nar-existing-home-sales-report-shows-2-4-decrease-in-june) [NAR methodology](https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index/methodology) [June inputs](https://www.mpamag.com/us/mortgage-industry/market-updates/record-home-prices-cant-hide-a-surprising-affordability-gain/582824)

MBA's August 5 release placed the average contract rate for a conforming 30-year fixed mortgage at 6.81% for the week ended July 31. Its seasonally adjustedseasonally adjustedA seasonally adjusted series removes recurring calendar patterns, such as the usual concentration of homebuying activity in warmer months. [MBA](https://www.mba.org/docs/default-source/research-and-forecasts/res-sample-documents/res_sf_wasfaq.pdf?sfvrsn=36976594_1) Market Composite IndexMarket Composite IndexMBA's Market Composite Index tracks changes in combined purchase and refinancing application activity rather than counting completed home purchases. [MBA](https://www.mba.org/docs/default-source/research-and-forecasts/res-sample-documents/res_sf_wasfaq.pdf?sfvrsn=36976594_1), which combines purchase and refinancing applications, fell 2.9%. [MBA](https://www.mba.org/news-and-research/newsroom/news/2026/08/05/mortgage-applications-decrease-in-latest-mba-weekly-survey) [Axios](https://www.axios.com/2026/08/05/mortgage-rates-bonds)

The two parts of that composite also weakened. Axios reported a 1.9% decline in MBA's Refinance Index. The Purchase Index fell from 159.8 to 154.0, which is a decline of about 3.6%. [Axios](https://www.axios.com/2026/08/05/mortgage-rates-bonds) [Investing.com](https://www.investing.com/economic-calendar/mba-purchase-index-1494)

Those figures are market context, not proof that the rate increase caused the application decline. MBA identifies interest rates, home prices, credit availability, the time of year and the general strength of the economy as influences on purchase applications. A single weekly observation cannot separate those forces. [MBA survey FAQ](https://www.mba.org/docs/default-source/research-and-forecasts/res-sample-documents/res_sf_wasfaq.pdf?sfvrsn=36976594_1)

Applications are also not completed home purchases. MBA defines an application as a request for a loan and an origination as a loan that has been approved, accepted and funded. Underwriting standards, denial rates and loan types can change the proportion of applications that become funded loans. [MBA survey FAQ](https://www.mba.org/docs/default-source/research-and-forecasts/res-sample-documents/res_sf_wasfaq.pdf?sfvrsn=36976594_1)

NAR reported a June 2026 Housing Affordability IndexHousing Affordability IndexNAR's Housing Affordability Index compares a modeled median family's income with the income required to finance a median-priced existing single-family home under NAR's assumptions. [NAR](https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index/methodology) of 102.3, compared with 95.5 in June 2025. It also reported a June medianmedianThe median is the midpoint of an ordered set, with half of the observations below it and half above it. existing single-family home price of $446,400. A Mortgage Professional report drawing on NAR's monthly data supplied the other detailed inputs used here: a 6.57% effective fixed rate and $109,152 of annual qualifying incomequalifying incomeIn NAR's model, qualifying income is the gross annual income required to keep monthly principal and interest at no more than 25% of monthly income. [NAR](https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index/methodology). [NAR](https://www.nar.realtor/newsroom/nar-existing-home-sales-report-shows-2-4-decrease-in-june) [Mortgage Professional](https://www.mpamag.com/us/mortgage-industry/market-updates/record-home-prices-cant-hide-a-surprising-affordability-gain/582824)

NAR's model assumes a 20% down paymentdown paymentA down payment is the portion of a home's purchase price that the buyer pays upfront instead of borrowing., so the modeled loan is 80% of $446,400, or $357,120. It spreads repayment across 360 monthly payments and limits principal and interestprincipal and interestPrincipal is the amount borrowed, while interest is the lender's charge for supplying the money. [CFPB](https://www.consumerfinance.gov/owning-a-home/closing-disclosure/) to 25% of gross incomegross incomeGross income means income before taxes and other deductions.. The formula therefore multiplies the monthly payment by 48 to obtain annual qualifying income. [NAR methodology](https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index/methodology)

Using the rounded published inputs, the implied median family incomemedian family incomeMedian family income is the midpoint income among families, which is different from household income because a household may consist of one person or unrelated people sharing a home. [NAR](https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index/methodology) [Census Bureau](https://www.census.gov/programs-surveys/cps/technical-documentation/subject-definitions.html) is $111,662.50. That comes from multiplying the published $109,152 qualifying-income figure by the official index ratio of 1.023. The income figure is inferred for this calculation; it is not presented here as a separately published NAR estimate.

The experiment then turns one dial. The home price, down payment, repayment term and inferred family income stay fixed, while the rate changes from 6.57% to 6.81%. This isolates the formula's sensitivity to the rate, much as a laboratory test changes one condition while trying to hold everything else constant.

Applying NAR's payment formula to the rounded inputs produces a monthly principal-and-interest payment of about $2,273.71 at 6.57%. At 6.81%, the payment becomes about $2,330.53. The difference is about $56.83, which rounds to $57 a month. [NAR methodology](https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index/methodology) [June inputs](https://www.mpamag.com/us/mortgage-industry/market-updates/record-home-prices-cant-hide-a-surprising-affordability-gain/582824)

Multiplying the stressed monthly payment by 48 produces annual qualifying income of about $111,865.66. Dividing the inferred family income of $111,662.50 by that qualifying-income figure and multiplying by 100 gives an index of approximately 99.818, reported here as 99.8.

The benchmark is crossed because the two income figures are close: the model's stressed qualifying income is about $203 higher than its inferred family income. This does not mean that a real family earning one dollar less than the threshold would automatically be denied a mortgage. NAR's index is an aggregate model, while an actual lender considers the borrower's debts, credit, loan terms and other circumstances. [NAR methodology](https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index/methodology) [CFPB](https://www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/)

Solving the same payment formula backward gives two useful breakpoints. With the other rounded June inputs held fixed, a comparable rate near 6.79% produces an index of 100. A rate near 7.25% produces an index of 95.5, which would erase the entire modeled improvement over June 2025.

These thresholds are not predictions. They answer a narrower question: how far can the rate dial turn, within this fixed-input model, before the interpretation changes? A different home price, income estimate or treatment of points would move both breakpoints.

MBA's 6.81% figure is a weekly contract rate from its application survey. NAR uses an effective fixed rate derived from Freddie Mac's contract-rate data, points and fees, and a loan amount based on NAR's median price. Contract and effective rates are related, but they are not interchangeable. [MBA survey FAQ](https://www.mba.org/docs/default-source/research-and-forecasts/res-sample-documents/res_sf_wasfaq.pdf?sfvrsn=36976594_1) [NAR](https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index)

We nevertheless use the direct substitution because it is transparent and answers the article's stated question. We do not estimate MBA's effective rateeffective rateAn effective rate estimates borrowing cost after accounting for mortgage points and an assumed time until the loan is repaid. [MBA](https://www.mba.org/docs/default-source/research-and-forecasts/res-sample-documents/res_sf_wasfaq.pdf?sfvrsn=36976594_1) because doing so would require its points and a defensible assumption about when the modeled loan is repaid. MBA says the effective rate depends on the contract rate, points and time to payoff. [MBA survey FAQ](https://www.mba.org/docs/default-source/research-and-forecasts/res-sample-documents/res_sf_wasfaq.pdf?sfvrsn=36976594_1)