Rising interest rates and inflation are causing Millennial millionaires to shelve major purchases for the time being.
Inflation and Rising Borrowing Costs Climbing Up Wealth Ladder
CNBC’s latest Millionaire Survey indicates that nearly 50% of Millennial millionaires are putting off buying a car and that 44% are waiting to purchase to buy a home these days. Nearly 33% of this demographic are choosing to delay vacations or trips.
Why? Higher interest rates and higher borrowing costs.
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Of course, inflation hits middle- and lower-income groups hardest but now, rising interest rates and higher prices are hitting younger and more affluent income groups.
George Walper, president of the Spectrum Group, the outfit that conducts the Millionaire Survey with CNBC, said, “The Millennial millionaires are clearly dealing with something they’ve never experienced. As a result, they are changing their behaviors and spending plans.”
Both inflation and rising rates which make borrowing more expensive are two brand new things to Millennials and, they’re taking each one seriously.
Ramifications of Inflation for Millennials
Inflation is making everything more expensive. For affluent Millennials, according to the CNBC Millionaire Survey, 39% have cut back on eating out; 36% have cut back on vacations; 22% have cut back on driving.
Some have even cut back on monthly subscriptions and/or activity memberships.
Ramifications of Higher Interest Rates for Millennials
Because this latest CNBC Millionaire Survey was conducted in May prior to the Fed’s latest interest rate hike, we can only assume that the percentages we’re quoting here may likely skew higher so please keep this in mind as you continue reading.
In May, 66% of Millennial millionaires said they were “less likely than a year ago to borrow money…” due to higher interest rates.
According to this survey, 44% of Millennial millionaires said they were delaying the purchase of a new home. Walper said, “Millennials, like everyone else, are seeing that the mortgages they were looking at in January are now more than twice as much.” (After the Fed raised interest rates .75 percentage points in June, mortgages are now even more costly than what they were in May when this survey was conducted.)
Millennial Millionaires Remain More Optimistic than Older Millionaires
Despite Millennial millionaires cutting back on their current expenses due to rising borrowing rates and inflation, they appear to be more optimistic than their older counterparts, according to the CNBC Millionaire Survey. Take a look:
- 55% of Millennials believe inflation will last less than a year while 66% of Boomers think inflation will last one or two years.
- 40% of Millennials are planning to buy more stocks as inflation increases while just 11% of Boomers are intending to buy stocks.
- Nearly 90% of Millennials are confident in the Fed’s ability to manage inflation but 38% of Boomers are “not at all confident.”
- More than 70% of Millennials believe the economy will be “stronger” or “much stronger” at the end of 2022 while 66% of Boomers believe the economy will be “weaker” or much “weaker” by year’s end
- 58% of Millennial millionaires believe that asset markets will increase by at least 5% by the end of 2022, with 39% anticipating double-digit gains. On the other hand, 44% of Boomer millionaires are expecting the asset market to experience double digit declines.
Thanks to CNBC.
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