New data from Ellie Mae, a tech company whose loan-processing software is used by many mortgage lenders, found that refinances represented 33% of all loans closed by millennials in September 2019. That’s the highest percentage seen since Ellie Mae began tracking the data in early 2016, according to a recent press release.
The surge in mortgage refinancing seems to strongly correlate with the drop in interest rates. The company reports an 8% month-over-month rise in refinance rates since the average interest rate for 30-year mortgages fell to 3.91%, the lowest rate seen since 2016.
Joe Tyrrell, chief operating officer at Ellie Mae, attributes this recent surge in refinancing to a potential for cost savings. He explains:
“If you look at 2018 alone, the average [interest] rate that millennials were purchasing at was 4.78%. On a 30-year, fixed-rate mortgage at an average loan amount of about $241,000, that’s a $1,263 payment that they’re making. If you fast forward to today, where rates are at 3.8%, that’s a savings of roughly $150-$250 per month.”
“As millennials are realizing the total cost of homeownership, beyond just the mortgage payment, that amount makes a difference,” he continues. “They’re starting to realize that when you own a home, there’s no landlord to call when things break.”