Ellie Mae: Time to Close Refinances Spikes for Millennials
Ellie Mae, Pleasanton, Calif., said time to close a refinance for Millennials in May took six days longer than in April, as lower rates resulted in increased refinance activity.
The company’s monthly Millennial Tracker noted average interest rates on all 30-year notes to Millennials dropped month-over-month from 4.61% in April to 4.53% in May, the lowest rate since February 2018. The report said Millennials were quick to take advantage, though the subsequent activity caused time to close for all refinances to increase from 36 days in April to 42 days in May.
The report said conventional loans saw time to close for refinances jump by six days month-over-month for Millennials, reaching 42 days in May, while time to close for VA refinances increased from 40 days in April to 45 days in May. Millennials closed FHA refinances in 41 days in May, compared to 42 days the month prior. Time to close for Millennials on all purchase loans remained flat at 40 days month-over-month.
In the midst of peak home buying season, the report said overall share of refinances for Millennials dropped to 14% in May, down from 15% in April. Share of refinances for FHA loans remained flat month-over-month at 6%, while share of refinances for conventional loans decreased from 17% to 16% and share of refinances for VA loans dropped slightly from 28% to 26%.
“Refinance activity amongst Millennials continued to rise as interest rates dropped,” said Ellie Mae COO Joe Tyrrell. “Time to close has been trending downward recently, but in May, the volume of activity pushed the mortgage finance industry to a tipping point where it spiked dramatically. As the digitization of the mortgage process continues to evolve, increased automation will help borrowers and lenders close all loan types more efficiently, even during periods of increased activity.”
The report said the increased level of refinance activity affected Millennials in major MSAs around the country. Time to close on refinances increased five days in the San Francisco Metropolitan Area month-over-month and six days in the Chicago Metropolitan Area. In the Austin MSA, it took Millennials 48 days to close a refinance in May compared to 34 days in April.
For all loans closed in May, 71% were conventional and 25% were FHA, while VA and other loans accounted for 2% and 3% respectively. The average interest rate on all loan types decreased in May. Month-over-month, rates on Conventional loans dropped from 4.55% to 4.48%, FHA loans fell from 4.71% to 4.64% and VA loans lowered from 4.21% to 4.08%.
The average age for Millennial borrowers increased slightly from 30.2 in April, to 30.3 in May while the average FICO score remained the same at 721. For all loans closed, 53% were closed by married individuals while 46% of all Millennial primary borrowers were single.
