First-time buyers show more demand for mortgages, even as interest rates rise

There was a sign in the weekly numbers that first-time buyers may be coming back to the market.

The Mortgage Bankers Association reported that mortgage applications to purchase a home fell 1% last week. The volume was lower last week. Demand for loans with lower down payments increased.

The results of last week's purchase applications varied, with conventional applications declining 2% and government applications increasing 4%, which is possibly a sign of more first-time homebuyers activity.

The average purchase loan size continued to decline as homebuying at the high end of the market weakened.

Last week, mortgage rates increased. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 5.65% from 5.45%, with points increasing to 0.68 from 0.57 for loans with a 20% down payment.

Demand for loan refis dropped 3% for the week and were 80% lower than a year ago, as a result of the increase in rates.

The borrowers moved away from the loans because they no longer offered the bargains they used to.

The spread between the two types of loans narrowed to 84 basis points. The movement made fixed rate loans more attractive than they were earlier in the year.

The stock market sold off on renewed fears of a recession as mortgage rates moved higher. The Federal Reserve is holding a meeting in Jackson Hole later this week.