Millennials leveraged near-record low-interest rates by refinancing their mortgages, creating an unprecedented surge in refinance activity in February.
Month over month, the average interest rate on all closed loans to millennial borrowers plunged from 3.94% to 3.86%. Millennials have not seen a rate this low since four years ago, according to Ellie Mae.
The share of refinances millennials closed in February came in at 34%, the highest percentage since Ellie Mae began tracking this data in 2016. Of all loans closed by this group for the month, conventional loans made up 75%, with refinances climbing to 41%.
"Economic impacts due to coronavirus (COVID-19) played a role in lowering interest rates in February, and millennial homeowners were quick to take advantage and refinance their mortgages," said Ellie Mae Chief Operating Officer Joe Tyrrell.
Older millennial borrowers ages between 30 and 40 drove the refinance surge, represented 41% of refis of all loans closed in February. In comparison, the refinance share of younger millennials aged between 21 and 29 was just 18%. The difference was because younger millennials saw a 0.7% drop in interest rates, compared to the slightly bigger 0.10% decline in interest rates for older millennials.
Despite the uptick in refinances, the average time to close for refis dramatically decreased from 50 to 38 days. For loans closed by millennials, time to close dropped from 47 to 41 days.
"While rates are currently favorable for consumers, we're closely monitoring how COVID-19, and the resulting rate cut from the Federal Reserve, will impact every step of the home buying and refinancing process and, in turn, the mortgage finance industry," Tyrrell said. "Lenders who have invested in the requisite technology will be better positioned to work with buyers and owners who are increasingly interested in taking these processes virtual."