According to recently released data, over 1.5 million refinances were taken out in May 2020 — the highest number ever as measured by Black Knight Financial Services. As the demand for refinancing increases, so too has the average timeline to complete a refinance: the current average is about three weeks, a 40 percent increase compared to pre-pandemic data.
This surge in refinancing isn’t limited to millennials; the records indicate that all age groups are taking advantage of the opportunity to save money on their mortgages. However, millennials are leading the charge — savvy young homeowners are increasingly drawn to the idea of locking in the low rates now in order to secure long-term savings down the line, and they have been actively refinancing since late 2019.
The biggest obstacle in the way of efficient and successful refinancing for many borrowers is paperwork. The increased demand is causing lenders to become backlogged with paperwork, resulting in longer and more frequent delays. Combined with new practices to ensure the safety of both staff and customers, the “mortgage factory” has been slowed to a crawl in recent months.
The good news is that lenders are continuing to streamline their processes, offering digital options that enhance convenience and reduce the need for physical document exchanges. For consumers looking to take advantage of the historic low rates, this means being able to apply for a refinance entirely online or over the phone. These efforts allow for a smoother and faster refinance process, and the majority of loans are now closing within thirty days.
In conclusion, the number of millennial homeowners refinancing their mortgages has reached record highs due to the historically low interest rates. Other age groups are also taking advantage of this opportunity to save on their monthly mortgage payments. Banks are facing an unprecedented load of paperwork, making it difficult to keep up with the increasing number of refinance applications. However, lenders have been updating their processes to include digital alternatives, helping to reduce the wait time between when an application is submitted and when a loan can close. Despite the delays, many borrowers are now able to complete their refinance within 30 days.
Analysis
The current historically low mortgage interest rates have encouraged unprecedented numbers of millennial homeowners to refinance their mortgages. According to figures released by Black Knight Financial Services, 1.5 million refinances were taken out in May 2020 — the highest in its records. This surge is not exclusive to millennials — all age groups are taking advantage of the opportunity to save money on their mortgage payments.
However, these high borrowing numbers have created a backlog of paperwork which has lengthened the average refinance timeline to three weeks, a 40 percent increase from pre-pandemic data. To mitigate the delays, many lenders are opting for more digital processes which can involve applying for a refinance online or over the phone. These efforts have shortened loan processing times and the majority of refinances can now be completed in thirty days.
Overall, this surge in refinancing activity illustrates how current low mortgage rates are helping to reduce monthly expenses for millennials. This shift is expected to have a positive effect on the economy as a whole as households will have more money to spend on goods and services, leading to increased economic activity.
This article was contributed on Aug 11, 2023
