Low Interest Rates Spur Refinance Boom for Millennials, According to the Latest Ellie Mae Millennial Tracker
PLEASANTON, Calif. – September 4, 2019 – Dropping interest rates in July led to an increase in refinance activity for millennials. According to the latest Ellie Mae Millennial Tracker, average interest rates on all 30-year notes fell from 4.39% in June 2019 to 4.19% in July 2019. This marks the lowest average monthly rate for millennials since November 2017. In response to these recent historic lows, the share of refinances jumped 9% month-over-month, reaching 23% after three consecutive months of minimal movement.
From June to July, the average interest rate for millennials decreased for all three loan types, with rates for FHA loans dropping to 4.26%, rates for Conventional loans falling to 4.15% and rates for VA loans declining to 3.73%. July interest rates for all three categories represent their lowest point since the fourth quarter of 2017.
For all Conventional loans closed by millennials in July, 27% were refinances, a 10% jump month-over-month. The share of refinances for all closed FHA loans increased 2% during this same time period and the share of refinances for all VA loans closed in July increased 7%.
“We’ve seen interest rates for millennials drop consistently throughout 2019, but from April through June, the refinance market was essentially flat,” said Joe Tyrrell, chief operating officer at Ellie Mae. “In the months leading up to July, consumers believed that rates would continue to decrease, and they were correct. Now, millennials are reaping the rewards and locking in historically low rates.”
The share of FHA loans closed by millennials dropped 2% month-over-month, the lowest mark of the year, despite rates on FHA loans decreasing to their lowest point since November 2017. The share of VA loans remained flat while the share of Conventional loans increased 2%.
“Lenders need to do a better job of educating potential homebuyers on various loan types, especially with rates as low as they are,” said Tyrrell. “FHA loans, for example, have more flexible credit requirements and require smaller down payments, which should be perfect for cash-strapped millennials. However, that demographic is not taking advantage of these types of loans.”
Time to close for all loans was 41 days in July, compared to 40 in August. The average FICO score for millennial borrowers was 728 and the average age for a millennial closing a loan in July was 30.5 years old.
The Ellie Mae Millennial Tracker is an interactive online tool that provides access to up-to-date demographic data about this new generation of homebuyers. It mines data from a robust sampling of approximately 80 percent of all closed mortgages dating back to 2014 that were initiated on Ellie Mae’s Encompass® all-in-one mortgage management solution. Given the size of this sample and Ellie Mae’s market share, it is a strong proxy of Millennial mortgage indicators across the country. Searches can be tailored by borrower geography, age, gender, marital status, FICO score and amortization type. For more information, visit http://elliemae.com/millennial-tracker.
About the Ellie Mae Millennial Tracker
The Ellie Mae Millennial Tracker focuses on Millennial mortgage applications during specific time periods. Ellie Mae defines Millennials as applicants born between the years 1980 and 1999. New data is updated on the first Monday of every month for two months prior. The Millennial Tracker is a subset of our Origination Insight Report, which details aggregated, anonymized data pulled from Ellie Mae’s Encompass origination platform. Additional information regarding the Origination Insight Report can be found at http://elliemae.com/resources/origination-insight-reports. News organizations have the right to reuse this data, provided that Ellie Mae, Inc. is credited as the source.
About Ellie Mae
Ellie Mae is the leading cloud-based platform provider for the mortgage finance industry. Ellie Mae’s technology solutions enable lenders to originate more loans, reduce origination costs, and shorten the time to close, all while ensuring the highest levels of compliance, quality and efficiency. Visit EllieMae.com or call 877.355.4362 to learn more.
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