Younger millennials are increasingly entering the housing market for the first time as older millennials drove refinances to peak highs.
Refi activity surged in February as refis closed during the month increased to 54 percent of all mortgage loans for millennials, up from 46 percent in January, according to the ICE Mortgage Technology Millennial Tracker. This brought refinance share to a level not seen since April 2020 during the peak of the pandemic refinance surge, when it hit 55 percent.
While the majority of this surge came from the older half of the generation, younger millennials, or those born between 1991 and 1999, closed a record high share of refinances. In February, younger millennials’ refinances accounted for 32 percent of loans closed – a significant jump since ICE Mortgage Technology began tracking the age groups separately in January 2020.
However, older millennials, or those born between 1980 and 1990, continued to be the driving force behind the refinance surge, as 61 percent of all loans closed by this age group were refinances.
“As we’ve seen with February’s refinance share increase, loan activity can change drastically from month to month, making it critical for lenders to set themselves up for success by adopting digital solutions early,” ICE Mortgage Technology President Joe Tyrrell said in a statement. “As we emerge from the pandemic, many borrowers will still want to complete the mortgage process as virtually as possible. Lenders can meet this demand by adopting new digital solutions early, like eClosing technology, that put them closer to a fully end-to-end digital mortgage process.”
Younger millennials continued to secure slightly lower rates than older millennials, however, average interest rates for this age group increased to 2.85 percent while average interest rates for older millennials stayed the same at 2.89 percent. The average age of millennial homebuyers also came in at 32.9, near January’s record high of 33.
Broken down by loan type, the older cohort is much more likely to use conventional loans with this loan type taking up 87 percent of originations to the age group. Another 10 percent of older millennials use FHA loans. Younger millennials, while still leaning heavily toward conventional loans, also have many more FHA originations at 20 percent, with another 77 percent using conventional.
More millennials could continue to enter the homebuying market as the spring continues and mortgage credit opens up. The mortgage market is opening up and mortgage credit availability increased due to the recovering job market and economy. The Mortgage Bankers Association’s Mortgage Credit Availability Index increased by 0.6 percent to 125.4 in March.