A recent analysis of mortgage rates by generation has unveiled some surprising insights, with millennials on average securing lower rates than baby boomers. The report, released this month by Freddie Mac, reveals that millennials and Gen X are tied for the lowest home loan rate at origination, both averaging 4%.
In contrast, mortgage rates for baby boomers are slightly higher, averaging 4.1%, despite this generation's higher tendency to refinance. The silent generation, which precedes the boomers, averages a 4.3% mortgage rate. Gen Z, the youngest adult generation, faces the highest average mortgage rate at 4.9%, likely because the oldest members of Gen Z, now 27, are more inclined to have purchased their first home as mortgage rates increased.
Millennials, now aged 28 to 43, benefited from entering the housing market during the favorable period from 2011 to 2021, when rates mostly stayed below 5%. This finding offers a glimmer of good news for millennials, often dubbed the “unluckiest generation” for entering the workforce amid the Great Recession.
However, there's a catch. While millennials enjoy the lowest mortgage rates, they also face the highest monthly payments of any generation due to larger loan amounts at origination. On average, millennials pay $1,900 monthly towards their mortgages on loans averaging $290,000. This is higher than the $1,600 monthly payments by Gen Z, who took out loans averaging $224,000 at origination.
In comparison, baby boomers owe $1,500 per month on their mortgages, with loan amounts averaging $229,000. Boomers also have a refinance rate of 65.2%, compared to 52.7% for Gen X, 27.5% for millennials, and a mere 3.2% for Gen Z. The silent generation, with the lowest average loan origination amount of $195,000, enjoys the lowest monthly payment at $1,200.
On a positive note, millennials are approaching their prime earning years—the ages from 45 to 54 when median wages typically peak. Despite facing significant economic challenges, millennials may already be the highest-earning generation for their age. Economist Kevin Drum notes that in 2021, the average 40-year-old millennial had an income of $49,000, higher than the inflation-adjusted $39,000 that the typical baby boomer earned at the same age. This income growth is primarily driven by wage gains among women, while men's earnings have remained relatively flat.
If this trend continues as millennials enter their peak earning years, the generation could finally see a boost in their personal finances and gain an advantage in the housing market.