Ellie Mae: Low Rates Spur Refinance Activity to Historic High
Ellie Mae, Pleasanton, Calif., said refinance activity reached a record high in March for millennial borrowers as interest rates plummeted.
The company’s monthly Millennial Tracker said refinance share increased for the third consecutive month and reached the highest mark since Ellie Mae began tracking this data in 2016.
The refinance share for all millennials in March rose to 38%, up four percentage points from February. Following an ongoing trend, refinance share increased as interest rates declined. The average interest rate for all 30-year loans closed by millennials in March was 3.66%, the lowest average rate since May 2016 and down from 3.86% in February.
(The Mortgage Bankers Association reported this week in its Weekly Applications Survey that overall refinance activity fell by 2 percent from the previous week, but was 210 percent higher than the same week one year ago. The refinance share of mortgage activity decreased to 70.0 percent of total applications from 71.6 percent the previous week.)
Ellie Mae said despite the uptick in refinance activity, average time to close for refinance loans fell two days month-over-month, from 38 to 36. Average time to close for all loans dropped from 41 to 39 days during the same period.
“The Federal Reserve cut its target interest rate to near-zero in March, causing interest rates to drop and giving savvy millennial homeowners the opportunity to refinance to more favorable rates,” said Joe Tyrrell, Chief Operating Officer with Ellie Mae. “That pattern follows a trend we’ve seen in our data over the last 12 months, but what’s more surprising is time to close numbers decreasing despite the surge in refinance activity and the limitations lenders are facing as a result of COVID-19. Technology is now more important than ever and lenders investing in the solutions necessary to manage their pipelines virtually are seeing success.”
The Millennial Tracker divides millennials into two groups: older millennials – borrowers between 30 and 40 years old, and younger millennials – borrowers between 21 and 29 years old. Refinance share for older millennials in March rose to 46%, up 5% month-over-month and more than double the refinance share of younger millennials (21%). Average interest rates for the two groups were both 3.66%, though younger millennials were more likely to opt for non-conventional loan types. In March, 27% of all loans closed by younger millennials were FHA loans, compared to 16% for older millennials.