Thanks, millennials: Younger generation props up mortgage market

The purported laziest generation in history is propping up the mortgage market.

Millennials made up 61 percent of home loans in July, up five percentage points from June, according to a report from mortgage software company Ellie Mae.

Millennials are motivated to buy homes in part by the average interest rate having dropped to 3.25 percent — the lowest since Ellie Mae began tracking it. Mortgage rates have remained historically low as the Federal Reserve tries to incentivize home buying and lending amid a sagging economy.

The majority of mortgage loans made in July were to younger millennials, born between 1991 and 1999. In this demographic, 81 percent of the loans are for home purchases and 19 percent for refinances.

Among older millennials (born in the ’80s), 53 percent of their loans were for purchases, according to Ellie Mae.

Younger millennials also turned to government backed loans such as Fannie Mae or Freddie Mac in July. About 97 percent of Federal Housing Administration loans for purchases were for younger millennials, the highest percentage since Ellie Mae started tracking this data in 2016.

Younger millennials closed loans with an average FICO score of 728 in July, compared to older millennials’ 747.

The housing market has been one of the few bright spots during the coronavirus. Existing-home sales rose 25 percent to a seasonally adjusted annual pace of 5.86 million in July, according to the National Association of Realtors. It was the largest monthly increase on record.

Most of the demand has come from people looking to take advantage of low mortgage rates as well as buyers seeking bigger homes after pivoting to working from home.