Interest rates fell in August to the lowest level recorded all year for millennials, which could mean expanded buying power for this segment. Ellie Mae said in its monthly Millennial Tracker report Wednesday that interest rates dipped to 3.763% in August amid talk of a Federal Reserve rate hike.
- While lower interest rates for the overall population would signal a shift toward refinances, for millennials — many of whom are first-time homebuyers — it increases their buying power. Ellie Mae reported that the average loan amount to millennial borrowers rose to $181,326 from July’s average of $180,413.
- Ellie Mae officials said millennials are really taking advantage of the lower interest rates in terms of buying power. There has been a gap between the general population and millennials in terms of loan amount, with millennials taking out much smaller loans than other homebuyers.
- Ellie Mae also reported the average debt-to-income ratio increased to 24/36, and the loan-to-value increased to 88 in August. The average FICO credit score held steady at 725.
- Additionally, the share of conventional loans made to millennials increased to 63% from 62% a month earlier. FHA loans made up 35% of all closed loans, same as in July.