Millennial mortgage debt surges due to higher rates and home prices. (iStock)
Millennials in particular seem to be hurting from higher mortgage interest rates after missing the window for historically-low rates during the pandemic, according to a recent report. In 2021, homeowners were looking at an average 30-year fixed mortgage rate of roughly 3%. Fast-forward almost two years, the rate has more than doubled to over 7%.
“[The] Effective mortgage rate is still below pre-COVID levels,” BofA stated in a note obtained by Markets Insider. “Everyone locked in a 3% mortgage except millennials. Millennials spend significantly more on housing, while boomers spend more on health care and entertainment.”
Millennials experienced a 20% jump in mortgage debt since the end of 2021, according to BofA. Comparatively, Gen X has seen a less-than-10% increase and Baby Boomers have not seen any increase in mortgage debt.
Baby Boomers and the Silent Generation jointly own $146 trillion in household net worth, while millennials have roughly $10 trillion in net worth, according to BofA.
Mortgage rates are changing daily, and it’s a good idea to check the most recent rates before you apply. You can explore your mortgage option in minutes by visiting Credible to compare rates and lenders.
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Americans struggle to maintain their finances, including home expenses
After enduring two years of persistent inflation, many Americans find themselves at a financial standstill, according to a September BMO Financial Group survey.
Nearly half (46%) of Americans haven’t made financial progress since inflation reached its highest point two years ago, according to the survey. Among those experiencing stagnation, 36% said they are not getting ahead on savings or goals and 66% had not established a financial plan.
Even though inflation has cooled since hitting a 40-year high in June 2022, Americans continue to experience increased expenses for most items.
“U.S. consumer confidence fell more than expected in August amid still-elevated food and gas prices, softening labor market conditions and economic uncertainty,” Michael Gregory, BMO deputy chief economist and head of U.S. economics said.
Without any foreseeable relief, 80% of Americans reported anxiety over worries about their worsening financial situation, according to the survey. The main stressors contributing to sleepless nights for respondents were: fear of unknown expenses (83%), family-related expenses (68%), housing costs (67%), medical expenses (62%) and credit card debt (51%).
Homeowners looking to reduce their monthly payments could consider refinancing their mortgage. Credible can assist you in comparing lenders and finding the best refinance rate for your financial situation.
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Fed keeps option of raising rates open as mortgage rates drop
Mortgage rates, which had climbed to nearly 8% for the widely favored 30-year mortgage loan, have seen a gradual decline in the past few weeks.
Mike Fratantoni, Mortgage Bankers Association (MBA) chief economist and senior vice president, said at the recent MBA Annual Conference in Philadelphia that the Fed will likely cut interest rates three times next year and expected mortgage rates to begin decreasing in 2024 and 2025.
Progress made in curbing inflation has been satisfying, but there is still a lot of work ahead, Fed Chairman Jerome Powell said at a recent International Monetary Fund (IMF) panel.
“Gross domestic product growth in the third quarter was quite strong, but, like most forecasters, we expect growth to moderate in coming quarters,” Powell said in a statement. “Of course, that remains to be seen, and we are attentive to the risk that stronger growth could undermine further progress in restoring balance to the labor market and in bringing inflation down, which could warrant a response from monetary policy.”
At its latest meeting, the central bank retained the short-term policy rate within a range of 5.25% to 5.5%. The Fed has raised interest rates 11 times since March of 2022 in an effort to reduce soaring inflation.
If you need to take out a mortgage even as rates remain high, comparing multiple options can help you save money on your monthly payments. Contact Credible to speak to a home loan expert and get your questions answered.
FED MAY NOT BE DONE WITH INTEREST RATE HIKES- HERE’S HOW THAT COULD IMPACT YOUR DEBT
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