Refinance activity hit a new all-time high in April, surpassing the previous high set in March, as the refinance share for April hit 55%, according to Ellie Mae.
This is an increase from the prior month’s share of 38% and an annual increase of 40 percentage points. The increase in refinances for millennials occurred while the average rate of 30-year loans declined for the fourth consecutive month to 3.48%.
“With interest rates reaching historic lows, millennials have the chance to set themselves up for significant savings over the long-term and they have moved quickly to seize this opportunity,” said Joe Tyrrell, COO at Ellie Mae. “The refinance spike means lenders are managing crowded pipelines, but they are doing so without the ability to meet face-to-face with borrowers because of social distancing. Lenders that invested in virtual solutions like online borrower portals, eClosing, and virtual verifications are capitalizing on this trend and turning this historic appetite for refinances into business growth.”
The average time to close refinances rose by three days from 36 to 39. Ellie Mae attributed the increase to rising volumes for lenders. The overall time to close all loans increased slightly to 40 days from 39.
The refinance share for older millennials (those older than 30-years-old) reached 62% in April—double the refinance share for younger millennials at 31%.
Both millennial sub-groups secured historically low average interest rates; 3.45% and 3.48%, respectively, for older and younger members of this demographic.
Ellie Mae added that the average FICO score for millennial borrowers in April was 741—the highest recorded by Ellie Mae’s Millennial Tracker.
“The rapidly changing secondary market, along with the overall economic uncertainty in the United States has caused lenders to implement stricter credit requirements for loans,” Tyrrell said. “For millennials looking to purchase their first home, now more than ever they are learning the importance of exploring different loan types, including those which don’t require as high of a credit score as Conventional loans.”