Interest rates on a 30-year note fell to 4.19% in July, which is the lowest monthly rate for millennials since November 2017, according to Ellie Mae’s Millennial Tracker.
Falling interest rates have caused the share of refinances to increase 9% month-over-month, reaching 23% after being stagnant in recent months.
Ellie Mae states that from June to July, the average interest rate for millennials decreases for all loan types (FHA, VA, and conventional). Rates fell 4.26% for FHA, conventional saw a drop of 4.15%, and VA loans declined 3.73%.
Interest rates in July for all categories are at their lowest point since Q4 2017.
Twenty-seven percent of conventional loans closed by millennials in July were refinances, which is a 10% month-over-month increase. The share of refinances closed for all FHA loans increased 2% during the same time, and VA loans closed saw a 7% increase in refinances.
“We’ve seen interest rates for millennials drop consistently throughout 2019, but from April through June, the refinance market was essentially flat,” said Joe Tyrrell, COO at Ellie Mae. “In the months leading up to July, consumers believed that rates would continue to decrease, and they were correct. Now, millennials are reaping the rewards and locking in historically low rates.”
Additionally, the share of FHA loans closed by millennials fell 2% from June, which is the lowest mark so far in 2019. There was no change in the share of VA loans and the share of conventional loans increased 2%.
“Lenders need to do a better job of educating potential homebuyers on various loan types, especially with rates as low as they are,” said Tyrrell. “FHA loans, for example, have more flexible credit requirements and require smaller down payments, which should be perfect for cash-strapped millennials. However, that demographic is not taking advantage of these types of loans.”
It took one day longer to close loans in July, increasing from 40 days to 41. Millennial borrowers had an average FICO score of 728 and the average age of millennial closing a loan was 30.5-years-old.