Not even a nationwide lockdown could stop millennials from securing the lowest average interest rate on 30-year mortgages in May.
The average interest rates for millennials were lower in May, down to 3.42% from 3.48% in April, according to the Ellie Mae Millennial Tracker. Older millennials (borrowers between 30 and 40 years old) locked in an average of 3.41% interest rate, slightly lower than 3.42% for younger millennials (aged 21 to 29 years old).
With rates down to their lowest levels, the share of mortgage purchases made by all millennial borrowers grew from 45% to 47% – the first month-over-month increase since November 2019. Meanwhile, refinance share was still up at 39% in May.
"The refinance market is still strong, but as we progress further into what is traditionally peak homebuying season, we're seeing the purchase market come to life as historically low-interest rates give first-time homebuyers the confidence to make the American Dream a reality," said Ellie Mae Chief Operating Officer Joe Tyrrell. "Millennials haven't previously been able to secure rates this low, and they're taking advantage of this opportunity."
The average time to close for all millennial loans was up from 40 days to 43 days. Broken down by loan purpose, the average time to close reached 44 days for refinances, four days longer than the month prior, while purchase loans took two days longer to close at 42 days.
"Spurred by low rates, overall loan application activity has increased, leaving lenders to manage larger-than-expected pipelines at a time when in-person meetings aren't feasible from a health and safety perspective," Tyrrell said. "Lenders with digital mortgage technology quickly shifted and took advantage of solutions, like virtual notarization, and they have been able to turn this volume into revenue, while lenders who haven't made this investment have struggled to clear their pipelines, leaving business on the table."
The average FICO score for a millennial borrower edged up one point to 742, the highest number in the report's history. The uptick was driven mainly by the increase in the average scores for FHA loan purchases and refinances, according to Ellie Mae.
"We're in an era marked by economic volatility, and this has caused lenders to tighten up their credit requirements, so it's more important than ever for millennials looking to enter the market or refinance, that they're taking good care of their finances and carefully managing their credit," Tyrrell said.