71 per cent of aspiring homeowners waiting for rate cuts before home purchase – BMO Survey

The latest BMO Real Financial Progress Index found current mortgage rates are hindering most prospective homebuyers from purchasing a home, with nearly three fourths (71 percent) waiting on rate cuts before entering the market – more than this time last year (64 percent).

Two years after the Federal Reserve began raising interest rates – in turn, leading to an increase in mortgage rates – and amid elevated home prices with limited inventory, Americans will likely have to hold out through another summer for potential relief, according to BMO Economics.

“In light of persistent strength in the U.S. economy, as well as stubborn underlying inflation, the market has been pushing its expectation for Fed rate cuts into the autumn,” said Michael Gregory, Deputy Chief Economist at BMO. “Looking ahead to 2025, we expect the Fed to stick to a gradual rate cut cadence.”

BMO’s survey also outlines Americans’ current views around homeownership and highlights a desire for more affordability – from cost of living and inflation to rising insurance costs and climate-related concerns:

• Buying a home still part of the “American Dream”: Most Americans (67 percent) say owning a home is one of their biggest aspirations in life. Most Millennials and Gen Z (73 percent on both counts) report it is one of their most coveted goals.
• Most aspiring homeowners remain distant from reaching homeownership milestone: 73 percent of aspiring homeowners saythe goal of owning their own home seems unattainable in their lifetime or aren’t sure if it will ever be possible.
• Home insurance costs affecting Americans’ purchase power: 43 percent say rising home insurance costs may impact their ability to keep or buy a home.  Gen Z feel most impacted by these costs (60 percent), followed by Millennials (55 percent).
• Climate-related factors impacting where Americans live: 41 percent say environmental deterrents such as water availability,storms, flooding, heatwaves, and wildfires will impact where they choose to live in the next five years.Gen Z (58 percent) are more likely to report this will impact where they live followed by Millennials (53 percent).
• Cost of living and housing a concern: 60 percent of Americans say their concerns about cost of living have increased over the past three months, while 68 percent say housing costs are causing financial anxiety.

“It’s clear that Americans are feeling the strain of elevated rates, and many are uncertain about how to go about navigating the ever-evolving housing market. It’s critical, especially during periods of high rates, for Americans to engage a mortgage advisor who can guide potential buyers and sellers through the homebuying journey, determine suitable budgets, and dispel common misconceptions about the pathways to homeownership – even if it currently feels out of reach. We believe in sustainable homeownership, underscored by a thorough understanding of the associated expenses and thoughtful budgeting practices to keep people on track to reach their goals and achieve real financial progress.”

– Thomas Parrish
Head of U.S. Retail Lending at BMO

Housing costs on par with credit card debt as a barrier to real financial progress with most Americans lacking a financial plan

When it comes to factors that are preventing Americans from making real financial progress, Americans say housing costs are just as much an impediment as credit card debt (30 percent on both counts). Additionally, 81 percent say their overall financial situation causes financial anxiety. Overall, 45 percent of Americans say they are making real financial progress – slightly more than this time last year (42 percent).

Despite most Americans setting financial goals for themselves (74 percent), many are lacking a roadmap to help reach them with only 32 percent having a written financial plan and 40 percent setting a yearly household budget.

“Creating a budget is not just about managing expenses; it’s about taking control of your financial future. It provides the blueprint for achieving your goals, whether it’s buying a home, saving for retirement, or paying off debt. With a clear plan in place, you can make informed decisions, prioritize your spending, and ultimately, make real financial progress.”

– Paul Dilda
Head of Consumer Strategy, BMO

BMO helps Americans stay on track and make progress

In addition to creating a budget and sticking to it, BMO offers the following tips to help Americans make real financial progress and navigate rising costs of living:

• Build a budget and review spending and financial statements at least once a month.
• Look for recurring “hidden” expenses, such as forgotten subscriptions, and cancel those you don’t use or need.
• Regularly meet with your banker or financial advisor to make sure your savings and payment patterns are on track to reach both near- and long-term goals.
• Set up a savings goal and recurring savings transfers into an account – no matter the amount – which will provide a sense of progress and motivation to achieve your savings goals.

To find out how BMO helps customers make financial progress, visit: https://www.bmo.com/us.