First-Time Buyers (Should) Take Advantage of Low Mortgage Rates

Blame the current political situation, blame the market, blame the crummy summer weather we’ve all been facing, but the fact of the matter is that mortgage rates have seen more fluctuation this year than usual.

Right now we’re in a six-week streak of low mortgage rates, including both initial home loan rates as well as refinance rates. Experts have their theories as to why, most of them reflecting America’s current position in the global economy and geopolitical landscape.

Between major policy announcements from the European Central Bank, a majorly important meeting of the Federal Reserve, and a potential meeting between the White House and the Chinese government that (hopefully) could start mending bridges between the two countries, the market is in preparation for further volatility in mortgage and refinancing rates.

Here’s maybe the most surprising thing - not as many people are taking advantage of this as the casual onlooker might expect. As reported by Business Report, mortgage rates are at a two-year low but mortgage applications are only up 10% from previous weeks, with a lot of up-and-down variation in between.

First-time home buyers account for a large number of mortgage applications, but even in these favorable conditions, many of the mortgage applications that are coming through are either current homeowners refining their existing mortgage, or homeowners looking to get out of their current home and into a new one. Current market research seems to indicate a shortage of people who have never owned a home before applying for a mortgage, even during these record recent lows.

The question, then, is obvious: why is this?

Two prevailing theories come to mind. The first one, as mentioned by MarketWatch, is that the current market hasn’t seen much activity from people who already own homes. The thinking behind this theory is that, due to the slowness of the market, there’s not enough people moving out of their current home to make way for new homeowners. Starter homes, a tier of housing most appealing to first-time homebuyers, simply aren’t available on the market in the numbers that would accommodate someone looking for their first home, and it may be slowing the entire market down accordingly.

The other common fear in regards to a shortage of first-time homebuyers is simply a hesitancy to buy homes due to confusion and anxiety. Many first-time home buyers are millennials or even younger, and due to the economic uncertainty they’ve experienced through their lives, mortgages have started to get a bad rap. When the potential audience for home ownership considers the entire process to be too difficult, too costly, or simply too confusing and unclear, the market won’t be able to grow as expected.