The May 2025 Mortgage Monitor Report from Intercontinental Exchange, Inc. explores the growing percentage of Gen Z and first-time homebuyers participating in the mortgage market.
“While first-time homebuyers continue to face affordability headwinds, they don’t have the same disincentive to transact as many repeat buyers, who remain locked in the golden handcuffs of relatively low monthly payments on their existing homes,” said Andy Walden, Head of Mortgage and Housing Market Research for ICE. “Younger homebuyers are picking up market share with lenders this spring, with people age 35 and under accounting for more than half of financed home purchases by first-time buyers in Q1.”
As increasing loan rates continued to reduce the number of repeat buyers in the market, first-time homebuyers (FTHBs) accounted for a record share of agency purchase lending in Q1 2025.
Simultaneously, Gen Z purchasers have experienced significant gains in places with lower housing costs, and FHA loans have once again gained traction as a vital resource for buyers who prioritize affordability.
“With first-time homebuyers making up an elevated share of purchase originations and Gen Z beginning to emerge in the market, lenders have a powerful opportunity to meet this digitally native generation by offering intuitive digital tools such as online applications, self-service portals, and document upload capabilities,” Walden said. “At the same time, capital markets participants should closely monitor how this shift may influence loan performance and portfolio behavior as these buyers gain a stronger foothold in the housing market.”
Key Findings from the May 2025 Mortgage Monitor:
- A record percentage of agency purchase loans are being made to first-time homebuyers.
In Q1 2025, FTHBs accounted for 58% of such purchase credit, the largest percentage ever. Interestingly, FTHB volume has experienced less compression, falling only 19%, even though repeat-buyer activity has significantly cooled from pre-pandemic levels, with originations among this category down 31% between 2018 and 2019.
With purchase loans making up a record 82% of agency lending in 2023, more than 75% last year, and over three-quarters in Q1 2025, buy lending has actually made up a bigger portion of issuance overall in recent years.
- One in four loans given to first-time homebuyers are to members of Gen Z.
The homeownership landscape is also beginning to change due to younger buyers. About one in four FTHB mortgage originations in Q1 2025 came from Gen Z, the oldest of whom is 28. In lower-cost markets, Gen Z involvement is higher; in South Dakota, Kentucky, and Indiana, Gen Z shares account for 30% of FTHB activity.
However, Gen Z’s involvement in more expensive coastal sectors is still limited by issues with affordability. With just 7% of all purchase mortgages and 11% of FTHBs, D.C. has the lowest percentage of Gen Z buyers. California follows closely after, with Gen Z accounting for 13% of FTHB loans and 8% of purchases.
- Down payments for first-time homebuyers are $80,000 less than those of repeat homeowners.
As the housing market improved and affordability remained a problem, FTHBs shifted more and more to FHA loans because of their lower down payment requirements. According to ICE Origination Data, the average FTHB made a down payment of $49K on a home purchase in March, which is significantly less than the average of $134K for repeat purchasers.
FTHBs financing using FHA loans made a much smaller down payment ($16K) than the average FTHB using a conventional conforming prime loan characteristic of GSE securitizations, which gave a $77K down payment. The average down payment for FTHBs who were eligible for VA mortgages was significantly lower, at slightly under $10,000.
- First-time homebuyers had higher default rates but slower prepayments, according to eMBS performance trends.
ICE eMBS data shows two trends that are noteworthy given growing exposure to FTHB purchase loans in recent vintages, even if performance can vary greatly by cohort. One reason is that loans to FTHBs typically have far slower prepayment rates than loans to repeat buyers. Additionally, FTHBs are more likely to default, albeit this tendency might differ greatly among investor classes, cohorts, and vintages.
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