Refinance activity for millennials reached an all-time high in March, climbing to 38%, according to Ellie Mae’s Millennial Tracker.
This represents a 4 percentage-point increase from the prior month. Ellie Mae says the refinance share rose as interest rates fell. The average interest rate for all 30-year loans closed by millennials in March was 3.66%—the lowest average since May 2016.
“The Federal Reserve cut its target interest rate to near-zero in March, causing interest rates to drop and giving savvy millennial homeowners the opportunity to refinance to more favorable rates,” said Joe Tyrrell, COO at Ellie Mae. “That pattern follows a trend we’ve seen in our data over the last 12 months, but what’s more surprising is time to close numbers decreasing despite the surge in refinance activity and the limitations lenders are facing as a result of COVID-19. Technology is now more important than ever and lenders investing in the solutions necessary to manage their pipelines virtually are seeing success.”
Refinance share for older millennials—between the ages of 30 and 40—was 46%, which is a monthly increase of 5% and more than double the share for younger millennials of 21%.
“Educating millennials on the various loan types available is a priority for lenders and seeing younger millennials securing FHA loans is a sign that lenders are making progress on this front,” Tyrrell said. “FHA loans tend to be a great option for younger borrowers as they require a smaller down payment and have more flexible credit requirements than Conventional loans.”
While the refinance activity rose in March, the Mortgage Bankers Association (MBA) revealed mortgage applications rose—albeit by 0.1%—for the week ending May 1.
However, the purchase index rose 7% from the prior week.
"Mortgage application volume was unchanged last week, even as the 30-year fixed-rate mortgage declined to 3.40%—a new record in MBA's survey," said Mike Fratantoni, MBA's SVP and Chief Economist. "Despite lower rates, refinance applications dropped, as many lenders are offering higher rates for refinances than for purchase loans, and others are suspending the availability of cash-out refinance loans because of their inability to sell them to Fannie Mae and Freddie Mac."
The total share of refinance activity fell slightly from 71.6% to 70%