By Alice Seeley
First-time buyers may be slowly returning to the housing market despite high-interest rates, according to the Mortgage Bankers Association’s weekly report.
The report stated that although mortgage demand is waning, first-time buyers are starting to return. This time last year, the volume of mortgage applications was 21% higher, although there was an increase in applications for loans with lower down payments.
Refinancing applications fell by 3% for the week and are down 83% compared to a year ago. There was a 4% jump in government purchase applications, a sign of increased demand from first-time homebuyers.
“Last week’s purchase results varied, with conventional applications declining 2% and government applications increasing 4%, which is potentially a sign of more first-time homebuyer activity,” Joel Kan, an economist for Mortgage Bankers Association, stated.
Kan also noted that “the average purchase loan size continued to trend lower, as purchase activity at the high end of the market is weakening.”
Mortgage rates increased for all loan types last week. The current average rate for a 30-year fixed rate is currently 5.65%, while the average contract interest rate for adjustable-rate mortgages rose to 4.81%.
Applicants are starting to move away from adjustable-rate loans since the rates are no longer as low as they were a couple of months ago.
“The spread between conforming fixed-rate loans and ARM loans narrowed to 84 basis points from over 100 basis points the prior week,” Kan said. “This movement made fixed rate loans relatively more attractive than ARMs, thereby reducing the ARM share further from highs seen earlier this year.”
