January's plummeting mortgage rates led to a spike in the share of millennials refinancing their home loans, a trend that should carry into February and March, according to Ellie Mae.
The split between refis and purchases reversed course in January, increasing to 31% from 27% in December while surging compared to 13% the year before.
"January was a favorable market for both millennial homebuyers and homeowners looking to capitalize on lower interest rates by refinancing their mortgages," Joe Tyrrell, chief operating officer at Ellie Mae, said in a press release. "With the purchase power of millennials increasing and inventory still tight across the country, we expect millennials to continue to search outside of major metropolitan areas, where there is more inventory, when making their homebuying decisions."
It took 47 days to close a loan to this cohort, an increase from 44 days the year prior and 43 days the month before. Conventional mortgages accounted for about 71% of completed loans to millennials in January, while 23% were Federal Housing Administration loans. Mortgages guaranteed by the U.S. Department of Veterans Affairs accounted for 2%, while other unspecified types of financing constituted the remaining 3%.
"Millennials are expected to fuel the housing market in 2020 and it's vital that lenders understand how to market to and work with this demographic," Tyrrell said. "We know that millennials prefer working with lenders who provide a blend of high-touch human interaction and automated processes, but as this demographic grows and ages up, the most successful lenders will be those that understand the nuances between older and younger millennials and adjust their strategies based on this insight."
The average millennial FICO score jumped to 728 from January 2019's 722, but stayed constant from December. At 31.3 years, the average age for millennial borrowers increased from 30.6 the year before and 30.4 month-to-month.
Married individuals represented approximately 55% of loans closed, while 45% of primary borrowers were single. Nearly 60% were male, 31% female and 10% unspecified. The average loan amount jumped to $211,218 from $196,140 year-over-year and $206,572 from December.
