Millennials continue to purchase homes despite rising interest rates – but to compensate they are looking at more affordable homes.
Rising interest rates did not deter Millennials from purchasing a home in October, but the average loan amount decreased from $192,005 in September to $189,686 in October, according to the latest Ellie Mae Millennial Tracker.
But when men were listed as the primary borrower, the average closed loan was much higher at $198,864. When women were listed as the primary borrower, the average closed loan dropped to $188,607.
“Although housing prices and interest rates are still rising at a faster pace in 2018 than they have in previous years, those trends are not yet stopping Millennials from purchasing homes and putting down roots,” said Joe Tyrell, Ellie Mae executive vice president of corporate strategy. “It is important for lenders to educate Millennials on the value of FHA loans that bring lower down payments and can allow these new homebuyers to stretch their dollar a little further even with rising interest rates.”
Purchase loans accounted for 88% of all closed loans to Millennial borrowers in October, up four percentage points from last year. Of these loans, 68% were conventional, 27% were FHA, 2% were VA and 3% were undisclosed.
The Millennial Tracker showed interest rates on all loans rose to 4.96%, up from 4.87% in September and 4.13% in October 2017. This marks the highest point since Ellie Mae began tracking the data in 2016.
Closing a loan took an average of 41 days across all home loans in October. This is down from 42 days last year. Refinances took an average of 48 days, up from 45 days in 2017.
The average FICO score remained flat for the third consecutive month at 722, down only slightly from 723 back in July, according to the report.
Millennial males, both single and married, were listed as the primary borrower on 60% of closed loans in October, while women were listed on 32% and the remainder did not specify a gender.