Demand for mortgages from first-time buyers is making a comeback

A real estate agent shows a home to a potential buyer in Miami.

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Mortgage demand continues to weaken, still hovering around a 22-year low, but there was a sign in the weekly figures that first-time buyers may be making a slow comeback.

Applications for home loans fell 1% last week compared to the previous week, according to the Mortgage Bankers Association̵[ads1]7;s seasonally adjusted index. The volume was 21% lower than the same week a year ago. However, there was a jump in demand for loans with lower down payments.

“Last week’s purchase results were mixed, with conventional applications falling 2% and public applications increasing 4%, potentially a sign of more first-time homebuyer activity,” said Joel Kan, an MBA economist.

He also noted that the average purchase loan size continued to trend lower, as home purchases at the high end of the market weaken.

Mortgage interest rates increased for all loan types last week. The average contract rate for 30-year fixed-rate mortgages with matching loan balances ($647,200 or less) rose to 5.65% from 5.45%, with points climbing to 0.68 from 0.57 (including the origination fee) for loans with 20 % decrease. payment.

As a result of the sharp rise in interest rates, demand for loan refinancing fell 3% for the week and was 83% lower than the same week a year ago.

Borrowers have also moved away from adjustable rate loans, which no longer offer the bargains they did just a few months ago.

“The spread between conforming fixed rate loans and ARM loans narrowed to 84 basis points from over 100 basis points the previous week,” Kan said. “This movement made fixed-rate loans relatively more attractive than ARM loans, further reducing the ARM share from highs seen earlier this year.”

Mortgage rates moved even higher to start this week, as the stock market sold off amid renewed fears of a recession. Investors are awaiting what they expect to be hawkish sentiment from the Federal Reserve at a meeting later this week in Jackson Hole, Wyoming.

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