The share of refinances closed by millennials decreased in November 2019 as interest rates on 30-year loans climbed. According to the latest Ellie Mae Millennial Tracker, 31 percent of loans closed by millennials in November were refinances, down 3 percent from the month prior. This marks the first month-over-month decrease for refinance share since May 2019.
The refinance market, according to Ellie Mae, slowed as the average interest rate on all 30-year loans increased for the first time in 2019. For all loans closed by millennials in November, the average interest rate was 3.95 percent, up from 3.90 percent in October.
Key markets across the United States saw the effects of surging interest rates, as refinance share declined month-over-month in Los Angeles (56 percent to 50 percent), Chicago (43 percent to 38 percent), Austin (32 percent to 26 percent), Miami (28 percent to 22 percent), San Francisco (51 percent to 48 percent) and Dallas (30 percent to 26 percent).
Although the average interest rate on FHA and VA loans dropped in November compared with the month prior, the average rate for conventional loans, which accounted for 73 percent of all loans closed by millennials for the month, increased from 3.90 percent to 3.97 percent.
Refinance share declined for all three loan types.
“Millennials are well-educated on their options as homeowners and have played a major role in driving the refinance market in 2019,” said Joe Tyrrell, chief operating officer at Ellie Mae, in a press release. “Interest rates increasing in November for the first time this year may indicate that the refinance boom has passed its peak, however rates are still relatively low and refinance share is up 21 percentage points year-over-year.”
With the decline in share of refinances as a percentage of total closed loans, purchase activity was on a relative upswing. As such, time to close on all purchase loans increased from 41 days to 42 days month-over-month. Time to close on all refinance loans reached 45 days, up from 44 days in October.
“For millennials, 29 and 30 are prime homebuying ages and millions of millennials will reach this marker next year,” Tyrrell said. “Millennials expect a balance of automation and human touch in the mortgage process, and as their purchasing power continues to grow, it’s important that lenders invest in technology to meet these demographics’ expectations.”