Study: Higher interest rates don’t stop millennial buyers
PLEASANTON, Calif. – Nov. 16, 2018 – Millennial homebuyers continued to close purchase loans in September 2018, despite interest rates rising to the highest point in the year, according to the latest Ellie Mae Millennial Tracker.
Interest rates on all loans rose to 4.87 percent in September, up from 4.86 percent the month before; conventional interest rates rose to 4.86 percent, up from 4.85 percent, and FHA interest rates rose to 4.94 percent, up from 4.93 percent in September.
Purchase loans continued to outpace refinance loans among millennial borrowers: 89 percent of loan volume last month was for home purchases, three percentage points higher than a year ago. Eighty-eight percent of closed purchase loans were conventional mortgages, compared to 81 percent in September 2017.
Millennials still showed their preference for conventional loans with 68 percent of all loans falling into that category. 27 percent of closed loans were FHA and 2 percent were VA loans.
Across all home loans, it took an average of 42 days to close last month., but a year ago, it took two days longer – 44 days. Purchase loans took an average of 41 days to close last month, compared to an average of 42 days to close a year ago. Refinance loans closed in 45 days last month, on average, compared to 46 days in 2017.
“Despite rising interest rates, millennials are still looking to buy homes,” says Joe Tyrrell, executive vice president of corporate strategy for Ellie Mae. “We’re still seeing the majority of Millennial loans fall into the conventional loan category, and with interest rates increasing, there is an even greater opportunity for the industry to educate these buyers on all of the options that they have available to them, including some of the higher loan-to-value products and FHA loan programs.”
Additional findings from latest Ellie Mae Millennial Tracker
- Millennial males (single and married) were listed as the primary borrower on 61 percent of closed loans in September. Women were listed on 32 percent and the rest did not specify a gender.
- 10 percent of all home loans to millennials were for refinances, while 11 percent of conventional loans were for refinances, both up one percentage point month-over-month for the quarter.
- 28 percent of closed VA loans in September 2018 were for refinances, a noticeable jump from 21 percent the month before.
- The average age of all millennial borrowers was 29.7, essentially flat from 29.8 in July and August, and 29.4 a year ago.
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