ICE: First-Time Homebuyers Comprise Record Share of Agency Purchase Lending

(Illustrations courtesy of ICE)

First-time homebuyers accounted for a record share of agency purchase lending in the first quarter as higher interest rates continue to dampen repeat buyer participation in the market, according to Intercontinental Exchange Inc.

At the same time, Gen Z buyers made “substantial gains” in more affordable states, while FHA loans regained popularity as a critical tool for affordability-minded homebuyers, ICE reported in its latest Mortgage Monitor Report.

“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,” noted 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.”

Some highlights from the May 2025 Mortgage Monitor include:

• First-time homebuyers are driving a record share of agency purchase lending

FTHBs made up 58% of such purchase lending in Q1 2025–the highest share on record.

While repeat-buyer activity has softened markedly from pre-pandemic levels–with originations among this group down 31% compared to 2018 and 2019–FTHB volume has seen less compression, declining only 19%. In fact, purchase lending overall has made up a larger share of issuance in recent years, with purchase loans accounting for a record 82% of agency lending in 2023, more than 75% last year, and nearly three-quarters in first-quarter 2025, ICE reported.

• Gen Z accounts for one in four loans issued to first-time homebuyers

Younger buyers are starting to reshape the homeownership landscape. Gen Z, the oldest of whom are 28, accounted for roughly one in four FTHB mortgage originations in the first quarter. Gen Z participation is higher in lower-cost markets, with Indiana, South Dakota, and Kentucky seeing Gen Z shares top 30% of FTHB activity.

Affordability challenges continue to constrain Gen Z participation in higher-priced coastal markets. Washington, D.C. has the lowest share of Gen Z buyers, with a mere 7% of all purchase mortgages and 11% among FTHBs. California is close behind, with Gen Z comprising 8% of purchase and 13% of FTHB loans, ICE found.

• First-time home buyer down payments lag repeat buyers by $80,000

With the housing market softening and affordability still a challenge, FTHBs moved increasingly toward FHA loans, which have lower down-payment requirements. ICE reported that the average FTHB in March put $49,000 down on their home purchase, well below the $134,000 average among repeat buyers.

“While the average FTHB using a conventional conforming prime loan typical of GSE securitizations provided a $77,000 down payment, FTHBs financing with FHA loans put down significantly less ($16,000),” the report said. “FTHBs who qualified for VA mortgages had even lower average down payments of just under $10,000”.

Walden noted lenders have a “powerful opportunity” to meet this digitally native generation by offering digital tools such as online applications, self-service portals and document upload capabilities. “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,” he said.