Mortgage demand from first-time buyers is making a comeback

A real estate agent shows a potential buyer a house in Miami.

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

Mortgage applications for buying a home fell 1% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 21% lower than the same week a year ago. There has, however, been an increase in demand for loans offering lower down payments.

“Last week’s shopping results were mixed, with conventional apps down 2% and government apps up 4%, which is potentially a sign of increased activity from first-time home buyers,” said MBA economist Joel Kan.

He also noted that the average purchase loan size has continued to decline as home buying at the high end of the market weakens.

Mortgage rates rose for all types of loans last week. The average contractual interest rate for 30-year fixed rate mortgages with conforming loan balances ($647,200 or less) increased from 5.45% to 5.65%, with points rising from 0, 57 to 0.68 (including origination fees) for loans with a 20% decline. Payment.

Due to the sharp rise in 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 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 move has made fixed-rate loans relatively more attractive than ARMs, further reducing the share of ARMs from the highs seen earlier this year.”

Mortgage rates rose even higher to start this week as the stock market sold off on renewed fears of a recession. Investors are expecting 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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