Interest rates fell from April to May, opening the door to that segment scoring the lowest average interest rate on 30-yer loans since January 2016, when Ellie Mae started monitoring the data.
The combination of low rates and peak homebuying season translated into a month-over-month spike in purchase share.
In May, for Millennials, the average interest rates dipped to 3.42%. The prior month, it was 3.48%. The purchase share bounced from 45% to 47% during that period. While it was the first month-over hike since November of last year, there’s been no interruption in refinance volume. On top of that, year-over-year, refinance remains at 39 percentage points.
While the refinance market still packs a punch, as we get deeper into what, traditionally, is the top of the homebuying season, the purchase market gains a foothold in light of interest rates that are historically low, bucking up the confidence of maiden buyers, said Ellie Mae COO, Joe Tyrrell.
“Millennials haven’t previously been able to secure rates this low and they’re taking advantage of this opportunity.”
In fact, the performance of the housing market might be just the shot in the arm the country needs in midst of the pandemic, which has sparked the current economic recession, according to Daniel McCue, Senior Research Associate at Harvard University’s Joint Center for Housing Studies.
In any event, with the jump in purchasing in the eye of a surge in refinancing, for all millennials, there was a leapfrog from 40 days in April to 43 in May in the average closing time. Based on loan purchase, among refinances, closing, on average, took 44 days. Month-over-month, that ballooned four days.
Low rates have prompted a jump in the volume of the overall loan application. As a result, with in-person meetings currently unfeasible due to COVID-19, lenders have been prompted to oversee larger-than-expected pipelines, said Tyrrell.
“Lenders with digital mortgage technology quickly shifted and took advantage of solutions, like virtual notarization, and they have been able to turn this volume into revenue, while lenders who haven’t made this investment have struggled to clear their pipelines, leaving business on the table,” he added.
On average, older millennials secured somewhat lower interest rales at 3.41%. Conversely, their younger counterparts were locked in at 3.42%.
Based the Ellie Mae Millennial Tracker, older millennials are composed of borrowers ranging from 30 and 40 years old, while those 21 to 29 make up millennial borrowers.
Added Tyrell: “We’re in an era marked by economic volatility, compelling lenders to tighten their credit requirements.” Consequently, for millennials seeking to enter the market or refinance, it’s important as ever to effectively manage their finances and credit, he noted.