I'd say that pay raises "count" to lower the ratio, but paying down the principal does not. The payments aren't changing, after all.

I think paying down the principal counts because it helps change how fast you could pay off the mortgage. The payments you refer to are only the minimum payment -- most mortgages let you overpay. Ours definitely does.

Also, even if you don't overpay, a lower principal value lets you refinance to a longer-term loan with lower payments, which also increases the overall safety of the loan.