Don't Blame The Avocado Toast: Millennials And Gen Z Getting Better Mortgage Rates

According to a recent report from Freddie Mac, Millennials and Gen Xers are securing lower mortgage rates than baby boomers.

Both millennials and Gen X secured mortgage rates averaging 4%, while baby boomers had slightly higher rates at 4.1%.

The Silent Generation, which came before the Boomers, averaged mortgage rates of 4.3%. Gen Z, the youngest adult generation with the oldest members now age 27, are more likely to have bought their first homes during the recent surge in mortgage rates.

Many millennials, now ages 28 to 43, started buying houses between 2011 and 2021, when mortgage rates were mostly below 5%.

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"It is clear that millennials buying their first home were doing so in a favorable interest rate environment," Churchill Mortgage home loan specialist Matt Ricci told U.S. News & World Report.

While millennials have the lowest mortgage rates, they face the highest monthly payments because they took out bigger loans. On average, millennials are paying $1,900 per month on mortgages originating at $290,000. This exceeds the $1,600 of Gen Z, who took out loans averaging $224,000 at origination.

Boomers, who took out loans averaging $229,000, make monthly mortgage payments of about $1,500. Their refinance rate is 65.2%, compared to 52.7% for Gen X, 27.5% for Millennials and 3.2% for Gen Z.

The Silent Generation has the lowest monthly payment at $1,200 and the lowest average loan origination amount at $195,000.

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"If you were lucky enough to grab a rate under 4%, I would only recommend refinancing if you had to take out cash for a serious emergency," Guaranteed Rate Mortgage Senior Vice President of Mortgage Lending Jennifer Beeston told U.S. News & World Report. "Ignore all the mortgage marketing telling you to take cash out. Guard that rate like you would a baby."

Millennials may not be willing to sacrifice their low mortgage rates and sell their homes to move into new ones while current rates are high. However, life events such as a new job or a growing family will eventually push them to move, which could make more homes available for other buyers.

Stephen Henn, an adjunct professor of economics and finance at Sacred Heart University, said the average homeowner owns a home for 10 to 12 years, so the opportunity to refinance at better rates will eventually present itself.

"Higher rates have softened home prices in many areas of the country, so homebuyers may find bargains compared to the last couple of years," Henn told U.S. News. "A 5% reduction in a home price will save far more money in the long run than a few percentage points in interest."

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