First-Time Homebuyers Comprise Nearly 50% of All GSE Purchases

Intercontinental Exchange, Inc (better known as ICE), has released its latest iteration of the Mortgage Monitor Report covering March 2024 and first-time homebuyers, based in internal proprietary data and public record data sets, which found that 4.3 million mortgages were originated in 2023, the lowest in the roughly 30 years ICE has been tracking said metric. 

In 2023’s purchase-driven market, first-time home buyers (FTHBs) accounted for an exceptionally high share, about 44%, of overall GSE securities issuances, raising the specter of performance risk for mortgage-backed securities investors. 

ICE data shows FTHBs have higher average front-end debt-to-income (DTI) ratios, but back-end DTIs similar to repeat buyers, spending more on housing but less on other forms of debt 

While demand in the mortgage market continues to track closely with interest rate movements, recent periods of easing have highlighted the potential for a rebound in refinance lending if rates move lower 

Comments from ICE’s VP of Enterprise Research Strategy, Andy Walden, on first-time homebuyers

Andy Walden, ICE VP of Enterprise Research Strategy, explains that one byproduct of such low volumes is a significantly altered makeup of recent agency mortgage-backed security (MBS) issuance. 

“Since 1995, only two quarters have seen fewer than 1 million first lien mortgages originated,” Walden said. “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.” 

“In fact, FTHB purchase loans accounted for an exceptionally high share of all issuance activity last year. They made up 39% of all GSE securitizations in 2023 – 12 percentage points higher than any other vintage in the past decade. The market in which these folks purchased their first home was one of record house prices, ballooning down payments, rising rates and elevated 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.” 

According to ICE, while on average, FTHBs have higher front-end debt-to-income (DTI) than repeat buyers, their back-end DTIs are more comparable. 

FTHBs spend a greater share of their income on housing than repeat buyers but pay less ton other forms of debt in comparison. While credit scores remain elevated among conventional purchase loans overall, the average FTHB has a 9-point lower credit score than the average repeat buyer. The delta widens among VA purchase loans, with the average FTHB credit score (709) in January 23 points below that of the average repeat buyer (732). Interestingly, FHA loans, the choice for many lower credit score buyers, have broadly the same average credit scores among both first time and repeat buyers. 

“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. Unfortunately, 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. 

“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. To that point, we did see the number of days from rate lock to close hit a 4.5 year low in January. In addition to enhancing the consumer experience, that also reduces hedging timelines. Those dynamics are tied tightly to the rate environment and can turn on a dime. Should rates fall, and the market shifts more heavily to refis, hedging times could increase as well – raising associated hedge duration risk. Industry participants would do well to develop a deep understanding the complexities of this evolving market to capitalize on opportunity and minimize risk.” 

Much more information on these and other topics can be found in this month’s Mortgage Monitor. Click here for previous reports. 

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Kyle G. Horst

Kyle G. Horst is a reporter for MortgagePoint. A graduate of the University of Texas at Tyler, he has worked for a number of daily, weekly, and monthly publications in South Dakota and Texas. With more than 10 years of experience in community journalism, he has won a number of state, national, and international awards for his writing and photography including best newspaper design by the Associated Press Managing Editors Group and the international iPhone photographer of the year by the iPhone Photography Awards. He most recently worked as editor of Community Impact Newspaper covering a number of Dallas-Ft. Worth communities on a hyperlocal level. Contact Kyle G. at
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