The latest Millennial Tracker from ICE Mortgage Technology found that purchase activity among millennials increased in March 2021, even as interest rates rose for the first time since October 2020.
According to the Tracker, purchase activity represented 51% of loans closed by millennials in March–an increase over February’s 46% purchase share, but on par with January’s activity of 53%. The rise in purchase activity occurred even as interest rates increased to 2.98%, up from 2.88% in February.
The average age of borrowers in the millennial generation remained relatively high at 32.7 in March, down from 32.9 in February, and January’s record high of 33. Their average FICO scores also decreased across the board, averaging 739 in March, down from 742 in February.
“Although rates are increasing, they are still hovering at record-low levels, and will likely continue to be favorable for millennials looking to purchase or refinance a home for a number of months to come,” said Joe Tyrrell, President of ICE Mortgage Technology. “As we enter the summer homebuying season, we are seeing a traditional increase in purchase activity; however, inventory remains extremely tight, so millennials may face steep competition when looking to make a purchase.”
Prior to March, interest rates had been steadily decreasing since October 2020, when rates stood at 3.03%. However, both younger millennials (those born between 1991 and 1999) and older millennials (those born between 1980 and 1990) experienced a slight rate increase in March. On average, rates for younger millennials increased from 2.85% in February to 2.96% in March, while rates for older millennials increased from 2.89% in February to 2.99% in March.
Earlier this week, Freddie Mac reported the 30-year fixed-rate mortgage (FRM) averaging 2.96%, down two basis points from the previous week’s average of 2.98%.
“The combination of low and stable rates, coupled with an improving economy, is good for homebuyers,” said Sam Khater, Freddie Mac’s Chief Economist. “It’s also good for homeowners who may have missed prior opportunities to refinance and increase their monthly cash flow.”
ICE recently reported that the time it took close all loans decreased in Q1 of 2021, from 58 days in January to 52 days in March. The time to close all purchase loans decreased over the quarter, from 57 days in January, to 53 days in February, and down to 51 days in March, as more and more lenders are utilizing electronic processes to close their loans.
“We’re seeing a compelling reduction in the time to close a mortgage as we continue into 2021,” said Tyrrell. “Part of the reason is lenders are continuing to adopt digital mortgage tools to improve their loan origination process and serve homebuyers more efficiently, for example eClose, which makes for a more streamlined process that saves time, and that shift is showing up in the data.”