Return of mortgage demand from first-time buyers

Mortgage demand continues to weaken, still close to a 22-year low, but there was a sign in the weekly numbers that first-time buyers may be slowly returning.

Mortgage applications to purchase a home fell 1% last week compared to the previous week, according to the Bankers Association’s seasonally adjusted Mortgage Index. Trading volume was 21% lower than the same week a year ago. However, there has been a jump in the demand for loans that offer lower down payments.

“Purchase results have been mixed in the past week, with traditional apps down 2% and government orders increasing 4%, which is likely a sign of increased activity for first-time homebuyers,” said Joel Kahn, MBA economist.

It also indicated that average purchase loan volume continued to trend downward, as home purchases weakened at the higher end of the market.

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

As a result of the sharp increase in interest rates, demand for loan refinancing fell 3% during 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 deals they did just a few months ago.

“The spread between fixed rate matching loans and ARM loans narrowed to 84 basis points from more than 100 basis points in the previous week,” Kahn said. “This move has made fixed-rate loans relatively more attractive to ARM, thus lowering ARM’s share further from the high levels seen earlier this year.”

Mortgage rates moved higher early this week, as the stock market sold out on renewed fears of a recession. Investors await what they expect from the Federal Reserve’s hawkish sentiment at a meeting later this week in Jackson Hole, Wyoming.