NEWS: Lower Rates Spur Millennial Mortgage Activity
MBA NewsLink Staff
June 7, 2019
Ellie Mae, Pleasanton, Calif., said across-the-board declines in mortgage interest rates and more favorable housing market conditions sparked an increase in Millennial mortgage activity in April.
The company’s monthly Millennial Tracker said lower interest rates spurred an increase in refinance loans from Millennials looking to take advantage of lower rates. The average 30-year note rate declined to 4.61% in April, down from 4.75% the previous month. With this drop, the percentage of refinance loans increased 4% month-over-month, from 11% in March to 15% in April, the highest share since February 2018.
Interest rates on conventional, FHA and VA loans all decreased month-over-month for Millennials in April. Rates on Conventional loans decreased from 4.7% to 4.55%, FHA loans fell from 4.84% to 4.71% and VA loans dropped from 4.36% to 4.21%. Shares of refinances in the three loan categories increased from March to April. Conventional loans saw the biggest surge in share of refinances, jumping from 13% to 17%, while FHA refinances rose from 5% to 6% and VA refinances increased from 27% to 28%.
Time to close for all loans dropped to 39 days, the lowest figure since February 2015. The decrease in time to close was driven in large part by a six-day decrease in time to close for refinances, which, on average, closed faster than purchase loans for the first time since March 2016. Refinances closed in 36 days compared to 38 days for purchases.
“Interest rates continued to drop in April and Millennials jumped on the opportunity to refinance,” said Joe Tyrrell, executive vice president of strategy and technology with Ellie Mae. “The significant drop in time to close shows homebuyers were motivated to close refinances while rates were low, and that Millennials are showing increased maturity as a homeowning demographic. On top of external factors, an increased investment in technology by many lenders is creating a more efficient mortgage process.”
Ellie Mae reported for all loans closed in April, 69% were conventional and 26% were FHA, while VA and other loans accounted for 2% and 3% respectively. Conventional loans closed in 39 days compared to 40 days for FHA and 46 days for VA.
“Millennial homebuyers continue to show a strong preference for conventional loans,” Tyrrell said.
Ellie Mae said the average FICO score for Millennial borrowers rose to 721 in April, up from 720 the previous month and average age dropped to 30.2, down slightly from 30.3 in March. For those refinancing a conventional loan, the average FICO score was 745, the highest mark since December 2016, while the average scores for those refinancing FHA and VA loans were 670 and 718, respectively.
