Report: First-time buyers helped spur mortgage market

Mortgage volume would have been substantially lower over the past few years were it not for a large number of first-time homebuyers moving into new homes.

Those buyers were likely spurred into moving not just by historically low mortgage rates and low home prices, but also because the federal homebuyer tax credit provided a significant incentive to the tune of a $8,000 tax credit, reported the Federal Reserve. The agency released data about last year's mortgage market, which reported that falling mortgage activity in 2007 and 2008 was brought out of the doldrums by a resurgent 2009.

However, the report noted that mortgage activity in 2009 was still below average, and much of it was led by strong refinancing returns. In fact, fewer people in 2009 sought a purchase mortgage in order to pay for their relocation to a new home, said the report. And even refinancing activity was below what would traditionally be expected given historically low interest rates.

"The decline in home-purchase lending could have been more dramatic were it not for first-time homebuyers," said the report, which added that many buyers combined the tax credit incentive with low down payments from mortgages through the Federal Housing Administration or Veterans Administration.

Recent figures showed that few people are moving after applying for purchase mortgages. The Mortgage Bankers Association reported last week that refinancing made up 80.5 percent of all mortgage activity.
 

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