Millennials are watching mortgage rates: Refis drop when rates rise
Millennials appear to be closely watching mortgage rates as refinances declined in December as rates ticked up slightly. In fact, refinance rates for Millennials dropped for the second consecutive month in December, according to the latest Ellie Mae Millennial Tracker.
As interest rates rose a bit in December, just 27% of all loans closed by Millennials in December were refinances, compared to 31% in November.
This 4% monthly decline represented the largest month-over-month drop in refinance share during 2019, the report said.
Although refinance activity fell somewhat in December, the refinance share was still up 17% year over year, an indication of how much lower interest rates were in 2019 compared to 2018.
“The refinance boom potentially ending is a major topic of discussion in the industry at the moment, but the reality is that if we take a step back and look at the last year, overall the market is still favorable for homeowners looking to refinance and millennials considering purchasing their first home,” said Joe Tyrrell, chief operating officer at Ellie Mae.
Interest rates on 30-year notes rose to 3.95% in December, up slightly from November. But leading up to November, interest rates had actually fallen 10 months in a row.
The average interest rate reached 5.12% for all 30-year loans in December 2018, more than a full percentage point above where it was in December 2019.
But as the recent data shows, mortgage rates have fallen in the first few weeks of 2020. In fact, mortgage rates this week fell to the lowest level in three years.
So, refis could very well be on the way back up. Especially considering that refinance applications are on the rise in the last couple of weeks.
The report says that despite a decrease in refinance share in December, it took a day longer to close refinances than in November. Time-to-close held steady at 43 days for all loan types and 42 days for purchase loans.
Other notable changes from December 2018 to December 2019 include a rise in Millennial FICO scores – from 721 to 728. Meanwhile, the share of conventional loans increased 3% while the Federal Housing Administration share dropped 3%.
“Whether millennials are refinancing more or increasing their purchase activity, the reality is that this demographic plays a central role in shaping the market. Lenders can best set themselves up for success by understanding that, throughout the mortgage process, millennials want automation and human touch working in concert to create the best customer experience possible,” Tyrrell said.
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