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Monday, June 3, 2024   /   by Richard Eimers


By Richard Eimers

A recent analysis of mortgage rates by generation has revealed some unexpected trends, showing that millennials have, on average, secured lower rates compared to baby boomers.

According to a report from Freddie Mac released earlier this month, both millennials and Gen X have managed to obtain the lowest home loan rates at origination, averaging 4%. In contrast, mortgage rates for baby boomers are slightly higher, at 4.1%, despite their higher tendency to refinance.

The silent generation, which came before the boomers, has an average rate of 4.3%. The youngest adult generation, Gen Z, faces the highest average mortgage rate at 4.9%. This higher rate can be attributed to the fact that the oldest Gen Z individuals, now 27, likely purchased their first homes during recent years when mortgage rates had increased.

Millennials, currently aged 28 to 43, benefited from entering the housing market between 2011 and 2021, a period characterized by historically low mortgage rates, often well below 5%. During this time, economic conditions and monetary policies created a favorable environment for homebuyers, allowing millennials to secure lower rates compared to other generations.

This analysis underscores the importance of timing in the housing market. Different economic cycles, policy changes, and market conditions can significantly impact mortgage rates for various generations. Understanding these factors can help future homebuyers and investors make informed decisions about their mortgage options and market entry timing.

As the housing market continues to evolve, staying informed about current trends and historical data is crucial for navigating the complexities of mortgage rates and making the best financial decisions.

Average Mortgage Rates by Generation

Millennials and Gen X locked in the lowest rates

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These insights highlight the complex landscape of mortgage debt across generations, where lower rates do not always equate to lower financial burdens.

Millennials, often dubbed the "unluckiest generation" for entering the workforce amid the Great Recession, have found a silver lining in mortgage rates. According to recent findings, millennials are tied for the lowest mortgage rates alongside Gen X.

However, this good news is tempered by a significant drawback. Despite enjoying low rates, millennials face the highest monthly mortgage payments due to larger loan amounts at origination.

Millennials are currently paying an average of $1,900 per month on mortgages, with loan origination amounts averaging $290,000. This is higher than the $1,600 monthly payments made by Gen Z, who have an average loan origination amount of $224,000.

In contrast, baby boomers have monthly payments of just $1,500 on loans averaging $229,000. Their refinance rate is notably high at 65.2%, compared to 52.7% for Gen X, 27.5% for millennials, and only 3.2% for Gen Z.

The silent generation, with the lowest average loan origination amount of $195,000, enjoys the lowest monthly mortgage payments at $1,200.

Mortgage Payments by Generation

Millennials have the highest average mortgage payments, because their loan amounts at origination are the largest of any generation.

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Millennials are on the brink of entering their prime earning years, typically between the ages of 45 and 54, when median wages peak for the average worker.

Surprisingly, despite facing significant economic challenges such as the Great Recession and the COVID-19 pandemic, millennials may already be the highest-earning generation for their age group. This is an encouraging sign for their future financial stability.

According to economist Kevin Drum, the average 40-year-old millennial in 2021 had an income of $49,000, surpassing the inflation-adjusted $39,000 that the typical baby boomer earned at the same age. This difference is largely attributed to significant wage gains among women, while men's earnings have remained relatively stable.

If these trends continue, millennials could see substantial improvements in their financial situations as they enter their peak earning years. This financial upswing could also translate into greater leverage in the housing market, providing a much-needed advantage for this often beleaguered generation.

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Beach Road Realty
Richard Eimers
17 Roundwood Drive
Inlet Beach, FL

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