Millennial Borrowers Close More Purchase Loans as Refi Share Drops
MBA NewsLink Staff
Despite a rise in interest rates and tight inventory, Millennials closed a higher share of purchase loans year-over-year in December, said Ellie Mae, Pleasanton, Calif.
The Ellie Mae Millennial Tracker reported the share of purchase loans rose 4 percent in December, accounting for 88 percent of all loans closed by Millennials, compared to 84 percent a year ago. With interest rates for all 30-year loans reaching 5.12 percent on average, the highest since Ellie Mae began tracking this data in 2016, refinance rates dropped 5 percent year-over-year, comprising 10 percent of all closed loans in December.
For all loans closed by Millennials in December, 68 percent were conventional, 27 percent were FHA, while VA and other loans accounted for 2 and 3 percent, respectively. The share of conventional purchase loans increased from 80 to 87 percent over the past year.
"Many Millennials are prioritizing homeownership and rather than being deterred by a tight market, they're increasingly competing for available homes or moving to areas where inventory is more robust," said Joe Tyrell, executive vice president of corporate strategy with Ellie Mae.
The report said the average age for a Millennial homebuyer in December was 29.5 years old, the lowest for any month in 2018. "This may be driven in part by younger borrowers who no longer feel the need to wait for a typical life event like marriage before buying a home," Tyrell said, noting from 2016 to 2018, 63 percent of borrowers between the age of 20 and 29 were single when they closed their loans.
Additional report findings:
--Thirty-year rates on both conventional (5.09 percent) and VA (4.86 percent) loans reached their highest mark since Ellie Mae began tracking the data in 2016 (the Mortgage Bankers Association reported lower interest rates during December). Average FHA loan rates remained at their highest point in December at 5.18 percent, matching the average figure from November.
--The average FICO score for Millennial borrowers on all closed loans dropped to 721, down slightly from 722 a year ago.
--On average, home loans closed in 43 days, flat from the previous year. Refinance loans closed in 46 days, up one day from 45 a year ago. Purchase loans closed in 41 days in December 2018, compared to 42 days the previous December.
--Millennial males (both single and married) were listed as the primary borrower on 60 percent of closed loans in December. Women were listed on 32 percent and the remainder of closed loans did not specify primary borrower gender.
--For all closed loans in December, 52 percent of Millennial borrowers were married while 48 percent were single. These figures were flat from a year ago.