Dropping interest rates in July led to an increase in refinance activity for millennials, according to the latest Ellie Mae Millennial Tracker. The average interest rates on all 30-year notes fell from 4.39 percent in June 2019 to 4.19 percent in July 2019.
This marks the lowest average monthly rate for millennials since November 2017. In response to these recent historic lows, the share of refinances jumped 9 percent month-over-month, reaching 23 percent after three consecutive months of minimal movement, Ellie Mae said.
“We’ve seen interest rates for millennials drop consistently throughout 2019, but from April through June, the refinance market was essentially flat,” Ellie Mae Chief Operating Officer Joe Tyrrell said in a press release. “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.”
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 percent, rates for conventional loans falling to 4.15 percent and rates for VA loans declining to 3.73 percent. 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, according to the Tracker report, 27 percent were refinances, a 10 percent jump month-over-month. The share of refinances for all closed FHA loans increased 2 percent during this same time period and the share of refinances for all VA loans closed in July increased 7 percent.
The share of FHA loans closed by millennials dropped 2 percent 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 percent.
“Lenders need to do a better job of educating potential homebuyers on various loan types, especially with rates as low as they are,” Tyrrell said. “FHA loans, for example, have more flexible credit requirements and require smaller down payments, which should be perfect for cash-strapped millennials. However, that demographic is not taking advantage of these types of loans.”
Time to close for all loans was 41 days in July, compared with 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.