With mortgage rates remaining stubbornly high at the start of 2025, many homeowners chose to remain in their current residence rather than pay a higher rate on a new home purchase. This “lock-in effect” led to notable market share gains by first-time homebuyers during the first quarter, according to a mortgage monitor report released Monday by Intercontinental Exchange Inc. (ICE).
“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,” Andy Walden, ICE’s head of mortgage and housing market research, said in a press release accompanying the report. “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.”
ICE found that first-time homebuyers accounted for 58% of agency purchase lending during the first quarter, which is the highest share on record. The report defines agency lending as loans backed by either government-sponsored agencies Fannie Mae and Freddie Mac or other federal entities such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs.
Additionally, about half of Fannie and Freddie purchase originations and about 80% of FHA purchase mortgages were from first-time buyers in the first quarter. Including refinances from existing homeowners, first-time homebuyer purchase loans comprised 43% of agency loans last quarter, up from 39% in the fourth quarter of 2024.
The report also revealed that first-time homebuyers are trending younger, with about 1 in 4 first-time mortgage originations in the first quarter coming from Gen Z homebuyers aged 28 or younger.
However, these younger homebuyers tend to put down less upfront money on their first home purchase. ICE data showed that in March the average first-time homebuyer had a $49,000 downpayment, which lagged well behind the $134,000 average downpayment among repeat buyers.
“With the housing market softening and affordability still a challenge,” the report observed, first-time homebuyers “moved increasingly towards FHA loans, which have lower downpayment requirements.”
