Forty-two percent of millennials say they are delaying buying a home because of the December 2016 Fed interest rate hike, according to a new TransUnion survey released this week of more than 1,200 consumers.
The Federal Reserve announced a second rate increase in March, which might be prompting even more millennials to hold off with their homebuying plans, according to the survey. The federal interest rates usually serve as a benchmark for private lenders’ interest rates, TransUnion notes.
Many millennials reported that they had heard about the December rate hike, and for those who did, they say it affected their decision to go ahead with a home purchase.
Consumers may be surprised to learn that mortgage rates lately, however, have been falling. The 30-year fixed-rate mortgage is near its lowest average of the year, averaging 4.10 percent last week, according to Freddie Mac
But millennials' concerns may go deeper. More than 38 percent currently have subprime credit, according to TransUnion's consumer credit database.
“Good credit is vital when shopping for a mortgage,” says Heather Battison, vice president of TransUnion. “Lenders rely on credit to assess borrowers’ riskiness and determine appropriate rates and terms for their loan. By keeping their credit strong and healthy, borrowers can position themselves for the best lowest possible rates and best possible terms.”
Yet, the TransUnion survey showed that millennials are more concerned about the costs of homeownership after they move in than their credit in getting in. Millennials expressed the most concern about how they would fund home improvements or deal with maintenance issues when moving in—more so than concerns about their credit.