First-time homebuyers made up a record share of agency purchase loans in 2023

Didier Malagies • March 4, 2024


First-time homebuyers made up 55% of agency purchase mortgages in 2023, according to Intercontinental Exchange (ICE) eMBS data, the highest such share in the 10 years ICE has been tracking the metric. 

A record 47% of government-sponsored enterprise (GSE) purchase loans in 2023 came from first-time homebuyers, a number that’s been trending gradually higher throughout the past decade.

“Since 1995, only two quarters have seen fewer than one million first lien mortgages originated,” Andy Walden, vice president of enterprise research at ICE. 


“The first was Q1 2023, and Q4 the second. Looking back, last year’s market was dominated by purchase lending, with loans to buy homes making up 82% of a historically low number of originations. While it remains a tough market for prospective purchasers, our eMBS agency securities database revealed that first-time homebuyers actually made up 55% of all agency purchase mortgages last year. That’s the highest share in the 10 years we’ve been tracking the metric.”


Counter to that trend, the first-time homebuyer share of Ginnie Mae purchase loan issuance pulled back in recent years as they have relied heavily on GSE mortgages.


“The market in which these folks purchased their first home was one of record house prices, ballooning down payments, rising rates and elevated debt-to-income ratios (DTIs). Given record exposure to first-time homebuyer loans, it’ll be worth watching the performance of this cohort very closely moving forward, particularly for those invested in 2023 agency MBS,” said Walden. 


First-time homebuyers averaged higher front-end DTIs for all products, but particularly for conventional mortgages, where the DTI for first-time homebuyers at 31.2% is more than 4 percentage points higher than for repeat buyers in recent months.


Back-end DTIs vary less between first-time and repeat buyers, as first-time homebuyers who spend more of their income on housing spend less on other debt, according to ICE market trends data.

Interest rates and origination trends 


While purchase lending will continue to dominate 2024 originations, a 19% month-over-month jump in refi activity on improved rates highlighted the potential for a rebound in refinance lending if rates move lower, ICE noted.


In January, ICE’s conforming 30-year fixed mortgage rate lock index showed rates averaging 6.6%. Mortgage rates have averaged close to the 7% mark as of Feb. 29 following a series of positive economic data.


In turn, rate/term refis, which have effectively been nonexistent for some time, made up 24% of all refinance activity to mark a two-year high. 


“We noted last month that if industry rate projections hold firm, we could see a mini-surge of refi activity around the 2023 vintage by the end of 2024,” Walden continued. 


“Even the relatively slight rate pullbacks of December and January spurred a growing number of homeowners to refinance. Demand is clearly there when rates cross certain thresholds and, if current rate forecasts hold true, we expect that demand to increase throughout the year.”


When it comes to retaining the business of refinancing homeowners, the industry has a lot of ground to make up. 


Servicers retained just one of every five such borrowers in Q4 2024, a 17-year low. Non-bank servicers did a better job, retaining a little over one in four refinancing borrowers, while bank lenders retained only one in 10.



“Providing an exemplary servicing experience is critical to reversing this trend, as is effectively identifying and engaging with customers likely to refinance. And when they have the opportunity to serve that customer, lenders need to be sure the front-end of the process is smooth as well,” Walden noted. 


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