Refinances by millennials rose sharply as mortgage rates fell

by Steve Randall08 Aug 2019

With a drop in interest rates from June 2018 to June 2019, millennial borrowers were quick to take advantage of lower borrowing costs.

The Ellie Mae Millennial Tracker reveals a rise in the share of refinaces by millennials from 8% in June 2018 to 14% in June 2019 as rates for all 30-year notes fell from 4.86% to 4.39%; the lowest average rate for millennial borrowers since January 2018.

The biggest rate drop was for VA loans, down from 4.54% in June 2018 to 3.97% a year later and 27% of VA loans were refinances compared to 18% a year earlier.

For FHA loans, rates fell from 4.93% to 4.49% while rates on Conventional loans saw a near half-point reduction, from 4.84% to 4.35%. The share of millennials refinancing FHA loans increased from 4% to 6% over the last year and the share of Conventional refinances jumped from 9% to 17%.

“Savvy millennials looking to lock in lower interest rates on their mortgages have helped drive a surge in refinance activity,” said Joe Tyrrell, chief operating officer at Ellie Mae. “While the Federal Reserve’s rate cut doesn’t necessarily mean that rates on mortgages will continue to drop, we’ll be keeping a close eye on its impact on both the refinance and overall mortgage market as we do anticipate that it will effect consumer behavior, including millennials who look to lower their payments.”

Massive opportunity for lenders

The share of FHA and VA loan refinances were both higher year-over-year but FHA loans overall decreased while VAs were flat.

FHA loans accounted for 27% of all loans closed by millennials in June 2018 but slipped to 24% a year later while shares of VA loans remain unchanged at 2%.

“There is and has been a massive opportunity for lenders to educate potential homeowners on the loan options available to them,” added Tyrrell. “For example, borrowers with lower FICO scores can take advantage of FHA loans to make homeownership a reality, but the overall awareness that this loan type exists needs to increase.”


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