Millennial Refinance Activity Hits 2019 Peak; Home Prices Growth Fastest in 6 Years
Ellie Mae, Pleasanton, Calif., said the share of refinances closed by millennials in October increased to a new high as interest rates on 30-year loans fell.
In a separate report, Black Knight, Jacksonville, Fla., said home price growth in October moved at its fastest pace in six years.
According to the monthly Ellie Mae Millennial Tracker, 34% of all loans closed by millennials in October were refinances, up 1% month-over-month, marking the highest refinance share since Ellie Mae began tracking such data in 2016.
Refinances made up 41% of conventional loans closed by millennials, up slightly from 40% in September, while refinance share for FHA loans stayed flat month-over-month at 10%. For VA loans, refinance share decreased to 42%, down 6 percentage points from the previous month.
Ellie Mae said refinance share peaked in October, as the average interest rate on all 30-year loans fell once again, dropping to 3.9% from 3.91% in September. October marked the second straight month that the average interest rate on all 30-year loans remained below 4%. Before September, it had not fallen under 4% since December 2016.
“Declining interest rates have significantly increased millennials’ awareness of refinancing as a fiscally responsible option and we’re seeing more and more homeowners in this demographic take advantage of refinancing their mortgages,” said Joe Tyrrell, chief operating officer at Ellie Mae. “Heading into 2020, lenders should proactively reach out to prospective millennial homebuyers whose likelihood of purchasing a home has now increased due to these historically low interest rates.”
The report noted with refinance activity on the rise, days to close a refinance loan increased across the board. Overall, days to close on all refinances jumped to 44 days in October, up two days month-over-month. This trend was consistent for all loan types, as days to close for Conventional refinances (44), FHA refinances (51) and VA refinances (48) all increased in October.
The report also said the average age of the primary borrower on all closed loans was 30.6, tied for the highest mark of any month in 2019. Average FICO score on all closed loans reached 730, the highest average score of the year. Conventional loans accounted for 74% of all closed loans, compared to 21% for FHA loans, 2% for VA loans and 3% for other.
Meanwhile, the monthly Black Knight Home Price Index said October was strong for home price gains, with annual home price growth rate rising from 3.9% in September to 4.25% in October, the largest single month increase (0.35%) in the annual growth rate in more than six years (July 2013) and the largest annual home price growth rate in nine months.
On a monthly basis, Black Knight said the average home price rose by 0.33%, nearly 6 times the five-year average for October and the largest single-month increase for any October since 2005.
Black Knight said these numbers reflect home sale activity one month after interest rates fell below 3.5% for the first time since October 2016. “In turn, that pushed home affordability to its strongest level in nearly two years,” the report said.