Low Interest Rates Spur Refinance ‘Boom’ for Millennials
Ellie Mae, Pleasanton, Calif., said falling interest rates in July led to an increase in Millennial refinance activity.
The company’s Millennial Tracker reported average interest rates on all 30-year notes fell from 4.39% in June 2019 to 4.19% in July 2019, marking the lowest average monthly rate for Millennials since November 2017. Accordingly, Ellie Mae reported the share of Millennial refinances jumped 9% month-over-month, reaching 23% after three consecutive months of minimal movement.
On Wednesday, the Mortgage Bankers Association reported in its Weekly Applications Survey the the unadjusted Refinance Index decreased by 7 percent from the previous week but was 152 percent higher than the same week one year ago, when rates were nearly a percentage point higher. The refinance share of mortgage activity decreased to 60.4 percent of total applications from 62.4 percent the previous week.
Ellie Mae said 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 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 with 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 report said 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%.
Ellie Mae said time to close for all loans rose to 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.
