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Millennials need a talking-to about mortgage rates

NEW YORK – Oct. 11, 2016 – Low mortgage rates could expand the buying power for millennial, first-time purchasers, according to Ellie Mae’s monthly Millennial Tracker.
Lower rates can be a boon for many consumers – such as homeowners looking to refinance – but today’s low rates can specifically help get first-time homebuyers on the move.
Interest rates decreased to 3.763 percent in August, according to Ellie Mae; and the average 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 interest rates today are so low, they could push millennials to “move into homeownership before family formation.”
Tyrrell says the gap is closing between the general population and millennials in terms of loan amount, though millennials tend to take out smaller loans than other homebuyers.
Tyrrell doesn’t believe any movement from the Federal Reserve to raise interest rates will derail millennials either.
“I’m not convinced it will significantly impact them,” Tyrrell told National Mortgage News. “What it’s going to affect is how much home they can buy.”
Ellie Mae’s report also showed the average debt-to-income ratio rose to 24/36 in August, and the average FICO credit score remained at 725. The share of conventional loans made to millennials rose to 63 percent in August, up from 62 percent the previous month. FHA loans comprised 35 percent of all closed loans.
Millennials are borrowing at the highest levels in Owensboro, Ky., which remained the top metro area overall for millennial borrowers in August, according to the report – Millennials made up 60 percent of all loans there.
Meanwhile, the top largest metro areas for millennial loans were St. Louis (34 percent) and Philadelphia (32 percent).
Source: “Lower Interest Rates Could Expand Millennial Buying Power,” National Mortgage News (Oct. 7, 2016)
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Source: Florida Realtors Feed

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