Surprise: Millennials Have the Lowest Mortgage Rates of Any Generation

What do you call a millennial with a low mortgage rate? Trapped.

Starter homes quickly turned into forever homes in 2024 as millions of millennials found themselves locked into Goldilocks mortgage rates — but with Baby Bear homes. A May 2024 Freddie Mac report showed that millennials are the generation with the lowest mortgage rates, paying an average of 4% on their home loans — but they also have the highest average loan amount and the highest average remaining balance.

With the average home loan costing north of 7% in 2024 and home prices showing few signs of falling, many millennials feel unable to move because a new home will come with a more expensive mortgage. Here’s what it means for homeowners across the country.

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Lowest Rates, Biggest Balances

Millennials — widely considered to be between the ages of 28 and 43 — took out mortgages of $290,000 on average, according to Freddie Mac data, with an average balance of $273,000 and just over 28 years remaining. Their monthly payment averages $1,900, and 52% of them are first-time homebuyers.

Gen X — the cohort aged 44 through 59 — have an average of $250,000 and 20 years remaining on their mortgages, and are also paying an average mortgage rate of 4%. Just 21% of them are first-time homebuyers, indicating that the majority of Gen X refinanced their existing mortgages when rates hit historic lows.

Gen Z, on the other hand — 91% of whom are first-time homebuyers — are paying the highest average mortgage rates at 4.9%. Born between 1997 and 2012, Gen Z homeowners still have lower average monthly loan payments ($1,600) and remaining balances ($218,000) than millennials.

How Did Millennials Get So Lucky?

Anyone shopping for a home in 2024 would jump at the chance for an interest rate in the 2% to 4% range. So how did millennials get so lucky?

Well, lucky might not be the right word.

Three events contributed to the lowest rate environment the U.S. has seen in recent history: the 9/11 attacks, the 2007 financial collapse and the COVID-19 pandemic. The culmination of effects brought on by these events pressured the Federal Reserve to put favorable monetary policy in place to lower interest rates, according to Matt Ricci, a home loan specialist with Churchill Mortgage.

As a result, rates plummeted between 2018 and 2022, hitting a record low of 2.65% in 2021. So while millennial homebuyers were reaching typical homebuying age, interest rates were scraping the floor.

“It is clear that millennials buying their first home were doing so in a favorable interest rate environment,” says Ricci. They snapped up homes they could afford despite steadily rising prices, with Freddie Mac’s National Mortgage Database showing that 37% of all millennial home purchases occurred in 2020 and 2021.

Debt and Other Problems

On top of big mortgage balances, millennials are also carrying a heavy debt load from credit cards, student loans and personal loans. According to Fed data, non-housing debt rests at $4.87 trillion for American consumers. And 73% of millennials are living paycheck to paycheck, according to finance and commerce research hub

While moving may be unaffordable due to high home prices and steep mortgage rates, refinancing remains an option to clear up cash flow for tackling high-interest debt. Compared to the national average of 22.63% for credit card interest rates, 7% for a new mortgage doesn’t sound so bad.

Plus, rising home prices could mean millennials have solid equity, which could be tapped during the refinance process. But the best thing to do might just be to leave it alone.

“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,” says Jennifer Beeston, senior vice president of mortgage lending at Guaranteed Rate Mortgage.

“Ignore all the mortgage marketing telling you to take cash out,” she says. “Guard that rate like you would a baby.”

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Unlocking the Rate Lock

Sometimes life has other plans, though. The authors of the Freddie Mac report acknowledge that “a financial disincentive” may prevent millennials from selling their home and moving to a new one while their mortgage rates are low and current ones are high. But as they stated in the report, “life events will ultimately push people to move.”

New jobs, growing families and other big life changes will spur millennials to sell — regardless of current rates. The resulting churn should free up home inventory for other homebuyers, including Gen Z, who either haven’t entered the market yet or entered it more recently.

Stephen Henn, an adjunct professor of economics and finance at Sacred Heart University, expects rates to stabilize in the coming years, making refinancing more attractive.

“The average homeowner owns a home between 10 and 12 years, so there will be plenty of opportunity to refinance at better rates,” he says. “Further, higher rates have softened home prices in many areas of the country, so homebuyers may find bargains compared to the last couple of years.”

In fact, home prices often matter more than interest rate; after all, you can refinance a home, but you can’t change the price you paid for it.

“A 5% reduction in a home price will save far more money in the long run than a few percentage points in interest,” Henn says.

Freddie Mac predicts rates will remain high at least until the end of the year, and it makes sense that millennials — and homebuyers of all generations — will readjust their expectations and move on with their lives, low rate or no low rate.

More from U.S. News

What Is a Starter Home?

A Checklist for First-Time Homebuyers

Is Refinancing a Mortgage Expensive?

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