Has the Millennial Refinance Boom Passed its Peak?


According to the latest Millennial Tracker report from Ellie Mae, 31% of loans closed by millennials in November were refinances, down 3% from the month prior. This marks the first month-over-month decrease for the refinance share since May 2019.

The refinance market slowed as the average interest rate on all 30-year loans increased for the first time in 2019. For all loans closed by millennials in November, the average interest rate was 3.95%, up from 3.90% in October.

Key markets across the U.S. saw the effects of surging interest rates, as refinance share declined month-over-month in Los Angeles (56% to 50%), Chicago (43% to 38%), Austin (32% to 26%), Miami (28% to 22%), San Francisco (51% to 48%) and Dallas (30% to 26%).

While the average interest rate on FHA and VA loans dropped in November compared to the month prior, the average rate for conventional loans, which accounted for 73% of all loans closed by millennials for the month, increased from 3.9% to 3.97%. Refinance share declined for all three loan types.

“Millennials are well-educated on their options as homeowners and have played a major role in driving the refinance market in 2019,” says Joe Tyrrell, chief operating officer at Ellie Mae. “Interest rates increasing in November for the first time this year may indicate that the refinance boom has passed its peak – however, rates are still relatively low, and refinance share is up 21 percentage points year-over-year.”

With the decline in share of refinances as a percentage of total closed loans, purchase activity was on a relative upswing. As such, time to close on all purchase loans increased from 41 days to 42 days month-over-month. Time to close on all refinance loans reached 45 days, up from 44 days in October.

The average FICO score for all loans closed in November remained relatively flat month-over-month, dropping one point to 729, while the average borrower age dipped slightly from 30.6 to 30.4. 

“For millennials, 29 and 30 are prime home-buying ages, and millions of millennials will reach this marker next year,” Tyrrell adds. “Millennials expect a balance of automation and human touch in the mortgage process, and as their purchasing power continues to grow, it’s important that lenders invest in technology to meet this demographic’s expectations.”

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