Rising interest rates are not likely to slow down millennial demand in the housing market, but they may lead millennials to purchase less expensive homes, according to the latest Ellie Mae Millennial Tracker, released on Wednesday and revealing data for April.
Interest rates rose to an average of 4.73 percent in April, up 0.10 percentage points from the previous month and the highest rate recorded on Ellie Mae’s Millennial Tracker, which was initiated in January 2014.
Loan amounts for millennials fell over the past two months, from $194,300 in February, down to $192,055 in March, and then they slipped again to $188,171 in April, according to Ellie Mae’s data.
“We believe millennial home purchases will continue to climb this summer and while interest rates may slightly impact the size of homes borrowers can get for their money, we don’t foresee it impacting their desire to buy,” said Joe Tyrrell, EVP of Corporate Strategy at Ellie Mae.
“Most millennials are buying a house because there are major changes happening in their lives such as starting a family, getting a new job, or because they’ve decided that they want to build equity and stop renting,” he said.
The majority of mortgage loans made to millennials in April were conventional loans. About 67 percent of millennial mortgage loans were conventional, while 29 percent were FHA loans.
VA loans accounted for only 2 percent of mortgage loans made to millennials. On the other hand, millennials accounted for 79 percent of total VA loans closed in April. This is up significantly from 66 percent recorded in February.
Millennial mortgage purchase loans took an average of 39 days to close in April, matching the previous month’s time to close. Refinance loans for millennials took 44 days to close.
Purchase loans made up the overwhelming majority of loans made to millennials in April, accounting for 89 percent, while refinance loans accounted for 10 percent.
FHA loans made to millennials took 41 days to close, while VA loans took 49 days to close.
The average FICO score for a millennial who took out a mortgage loan in April was 721. The average was one point higher for women than for men—723 compared to 722.
Millennial borrowers are getting a little younger with the average age of millennials obtaining mortgage loans in April at 29.9 years of age, down from 30.1 years the previous month, according to Ellie Mae.
Millennial borrowers who closed loans in April were more likely to be male, and just over half were married, according to Ellie Mae. Sixty-two percent of millennial borrowers in April were male, while 32 percent were female.
Fifty-two percent of millennials who obtained mortgage loans in April were married, while the remaining 42 percent were single.