Refinance activity among millennials borrowers increased in January following several months of decline.
This corresponded with the average interest rate on all 30-year loans closed by millennials in January dropping to 3.94% from 3.95% in December. The previous two months saw rates rise.
Ellie Mae’s Millennial Tracker for January shows that 31% of all loans closed by millennials in the month were for refinance, up from 27% in December.
"January was a favorable market for both millennial homebuyers and homeowners looking to capitalize on lower interest rates by refinancing their mortgages," said Joe Tyrrell, chief operating officer at Ellie Mae. "With the purchase power of millennials increasing and inventory still tight across the country, we expect millennials to continue to search outside of major metropolitan areas, where there is more inventory, when making their homebuying decisions."
Younger versus older
From these latest figures, the firm’s data is split into younger (aged 21-29 years) and older (aged 30-40 years) millennials. It shows that 38% of loans closed by older millennials were refinances compared to 17% for the younger group.
Younger borrowers were more likely to take advantage of FHA loans (31%) than older millennials (20%).
"Millennials are expected to fuel the housing market in 2020 and it's vital that lenders understand how to market to and work with this demographic," said Tyrrell. "We know that millennials prefer working with lenders who provide a blend of high-touch human interaction and automated processes, but as this demographic grows and ages up, the most successful lenders will be those that understand the nuances between older and younger millennials and adjust their strategies based on this insight."
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