Low mortgage rates could particularly expand the buying power for millennial, first-time purchasers, as outlined by Ellie Mae’s monthly Millennial Tracker.
Millennial Home buyers Need a Rate-Conversation
Lower rates can be quite a boon for most consumers – such as home owners looking to refinance – however the low rates may help get first-time home buyers on the move, reported by Ellie Mae’s report.
Home interest rates decreased to 3.763% in August, as outlined by Ellie Mae. The typical loan amount to millennial borrowers rose to $181,326 from July’s average of $180,413.
“Millennials are really taking advantage of the lower interest rates in terms of buying power,” says Joe Tyrrell, Ellie Mae executive vice president of corporate strategy. The low interest rates could push millennials to “move into home ownership before family formation.”
Tyrrell says the gap is closing between the general population and the millennials in terms of loan amount. Millennials tend to take out smaller loans than other home buyers.
Tyrrell doesn’t believe any movement from the Federal Reserve to raise its home interest rates in the near future to derail millennials either.
“I’m not convinced it will significantly impact them,” Tyrrell told the National Mortgage News. “What it’s going to affect is how much home they can buy.”
Ellie Mae’s report also showed the common debt-to-income ratio rose to 24/36 in August, and the average FICO credit score remained at 725. The proportion of conventional loans made to millennials rose to 63% in August, from 62% the previous month. FHA loans comprised 35 % of all closed loans.
Millennials are borrowing by the highest levels in Owensboro, Ky., which remained the most notable metro area overall for millennial borrowers in August, using the report. Millennials made up 60 % of all loans there. Meanwhile, the greatest metro areas for millennial loans is in St. Louis (34%) and Philadelphia (32%).