Mortgage applications continue to drop, but first-time buyers may return – 24/7 Wall St.

Mortgage applications continued to fall last week, slipping to a 20-year low amid rising interest rates. However, mortgage applications from first-time home buyers actually increased last week, based on the number of government mortgage applications.

Mixed data on mortgage applications

The Mortgage Bankers Association has released its latest mortgage application data. The organization said overall demand for home loans is still weakening and hovering around a 22-year low. However, he also pointed to a signal in the data suggesting that first-time home buyers could return to the market.

According to the seasonally adjusted MBA index, the total number of mortgage applications fell 1% last week compared to the previous week. The organization added that total volume was down 21% from the same week last year, although there was an increase in demand for mortgages with reduced down payments.

Digging deeper into the results, the MBA added that the number of conventional mortgage applications fell by 2%, while the number of government applications increased by 4%. MBA economist Joel Kan told CNBC that these mixed results suggest that first-time buyer activity may be on the rise.

He also said the average loan size requested on last week’s mortgage applications continued to decline, signaling continued weakness in the high-end home buying market.

Increase in interest rates for mortgage loans

Interest rates for all types of mortgages continued to rise last week. The average contractual interest rate on 30-year fixed-rate mortgages with balances of $647,200 or less fell from 5.45% to 5.65% last week. On loans with a down payment of 20% of the purchase price, the average number of points used, including the origination fee, increased from 0.57 to 0.68.

The MBA also reported that the sharp rise in interest rates has also squeezed demand for mortgage refinancing. Refinance requests fell 3% for the week and were 83% lower than the same week last year.

Home borrowers have also shunned adjustable-rate loans, which no longer provide the bargains they did only a few months ago. Kan said the spread between conforming fixed rate loans and adjustable rate mortgages narrowed to 84 basis points from more than 100 basis points the previous week. He added that this change made fixed-rate loans a little more attractive than adjustable-rate mortgages.

Mortgage rates continued to climb early this week amid a sell-off in the stock market on renewed fears of a recession. All investors will be watching what the Federal Reserve says at this week’s Jackson Hole symposium, where Fed Chairman Jerome Powell is expected to retain his hawkish sentiment.

This article originally appeared on ValueWalk

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