The share of refinances closed by Millennials increased in October to an all new high, according to the latest Ellie Mae Millennial Tracker report.
The report showed 34% of all loans closed by Millennials, or those born between 1980 and 1995, were refinances. That’s up 1% from the previous month to the highest share since Ellie Mae began tracking in January 2016.
Breaking it down by loan type, refinances made up 41% of conventional loans closed by Millennials, up slightly from 40% in September, and the refinance share for FHA loans remained flat at 10%. For VA loans, the refinance share dropped to 42%, down a full six percentage points from the previous month.
Refinances on FHA loans remains low for several reasons. For example, many borrowers are more financially sound when they refinance, and are better served with a conventional product. Also, the FHA’s life-of-the-loan mortgage insurance is enough to spur refinances out of FHA loans even when interest rates begin to spike.
The refinance share peaked in October as the interest rate for 30-year loans once again fell, dropping from 3.91% in September to 3.9% in October. This marked the second straight month that the average interest rate was below 4%, a level it had not fallen to since December 2016.
“Declining interest rates have significantly increased Millennials’ awareness of refinancing as a fiscally responsible option and we’re seeing more and more homeowners in this demographic take advantage of refinancing their mortgages,” said Joe Tyrrell, Ellie Mae chief operating officer. “Heading into 2020, lenders should proactively reach out to prospective Millennial homebuyers whose likelihood of purchasing a home has now increased due to these historically low interest rates.”
But borrowers beware – while the lending market may be ready for an onslaught of new Millennial borrowers, the housing market may not be quite as ready.
The days to close a loan increased across the board, jumping to 44 days in October, up from 42 days in September. This trend was consistent for all loan types, as days to close for Conventional refinances at 44, FHA refinances at 51 and VA refinances at 48 all increased in October.
The report showed the average age of the primary borrower on all closed loans was 30.6 in October, tied for the highest mark of any month in 2019. Also highest for 2019 was the average FICO score on all closed loans, which reached 730 in October.