Millennials are becoming more reliant on debt, according to a recent report from Experian. As a result, Millennials, aged between 23 and 38, are likely to hold more debt than their peers. Millennials held an average of $222,211 in mortgage debt in Q1 2019, Experian states, a 5% increase from Q1 2018 and one of the largest mortgage debt increases seen by any generation in the past year.
Millennial mortgage balances grew an average of 5%, which was the second-highest growth rate behind members of Generation Z, who saw their average balances increase by 15% since Q1 2018. As debt balances increased, Millennials have begun looking into refinancing. According to Ellie Mae, interest rates on 30-year loans saw a drop in interest rates, leading to more refinancing among Millennials.
“Savvy millennials looking to lock in lower interest rates on their mortgages have helped drive a surge in refinance activity,” said Joe Tyrrell, COO at Ellie Mae. “While the Federal Reserve’s rate cut doesn’t necessarily mean that rates on mortgages will continue to drop, we’ll be keeping a close eye on its impact on both the refinance and overall mortgage market as we do anticipate that it will affect consumer behavior, including millennials who look to lower their payments.”
Additionally, Ellie Mae notes that with an increased investment in technology, time to close has dropped across the board year-over-year. Average time to close on all loans for millennials has dropped two days while average time to close on refinance and purchase loans has dropped four days and one day, respectively.
“There is and has been a massive opportunity for lenders to educate potential homeowners on the loan options available to them,” added Tyrrell. “For example, borrowers with lower FICO scores can take advantage of FHA loans to make homeownership a reality, but the overall awareness that this loan type exists needs to increase.”