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Ellie Mae's Millennial Tracker found that millennials are securing the lowest average interest rate on a 30-year mortgage since it began tracking the demographic in January 2016. With lower rates and the peak homebuying season upon us, Ellie Mae reported a month-over-month increase in purchase share for the demographic.
The average interest rates for millennials dropped from 3.48% in April to 3.42% in May. Purchase share began to rise from 45% to 47%, which was the first month-over-month increase since November 2019, according to the report.
"The refinance market is still strong, but as we progress further into what is traditionally peak homebuying season, we're seeing the purchase market come to life as historically-low interest rates give first-time homebuyers the confidence to make the American Dream a reality," said Ellie Mae Chief Operating Officer Joe Tyrrell. "Millennials haven't previously been able to secure rates this low and they're taking advantage of this opportunity."
In May, the average closing time for all millennial loans moved up to 43 days, a three-day increase from the prior month.
"Spurred by low rates, overall loan application activity has increased, leaving lenders to manage larger-than-expected pipelines at a time when in-person meetings aren't feasible from a health and safety perspective," 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."
The report also revealed that the average FICO score for millennial borrowers in May was 742, which is the highest score recorded in the history of Ellie Mae's Millennial Tracker. The report attributes this to FHA loans, which saw average scores for the loan type spike month-over-month for purchases and refinances.
"We're in an era marked by economic volatility, and this has caused lenders to tighten up their credit requirements, so it's more important than ever for millennials looking to enter the market or refinance, that they're taking good care of their finances and carefully managing their credit," said Tyrrell.
