Average interest rates on all 30-year notes to millennial borrowers declined in April 2019, spurring an increase in refinance loans from members of the generation looking to take advantage of lower rates, according to the latest Ellie Mae Millennial Tracker. The average 30-year note rate declined to 4.61 percent in April, down from 4.75 percent in March 2019.
With this drop, the percentage of refinance loans increased 4 percent month-over-month, from 11 percent in March to 15 percent in April, the highest share since February 2018, the report said.
Additionally, interest rates on conventional, Federal Housing Administration (FHA) and VA loans all decreased month-over-month for millennials in April. Rates on conventional loans decreased from 4.7 percent to 4.55 percent, FHA loans fell from 4.84 percent to 4.71 percent and VA loans dropped from 4.36 percent to 4.21 percent.
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 percent to 17 percent, while FHA refinances rose from 5 percent to 6 percent and VA refinances increased from 27 percent to 28 percent, Ellie Mae said.
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 with 38 days for purchases.
“Interest rates continued to drop in April and millennials jumped on the opportunity to refinance,” Joe Tyrrell, executive vice president of strategy and technology at Ellie Mae, said in the report. “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.”
For all loans closed in April, 69 percent were conventional and 26 percent were FHA, while VA and other loans accounted for 2 percent and 3 percent, respectively. Conventional loans closed in 39 days compared with 40 days for FHA and 46 days for VA.
“Millennial homebuyers continue to show a strong preference for Conventional loans,” Tyrrell said. “There’s an opportunity to educate millennials on alternate loan types, including FHA loans, which allow for smaller downpayments, making homeownership more accessible. There is no one-type-fits-all loan, so it’s vital that all borrowers have a firm understanding of the various loan options available and communicate with their lender to make the decision that is right for them.”
The average FICO score for millennial borrowers was 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.