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A fifth of US homeowners – some 11 million Americans – are struggling to afford their mortgage payments as a result of rising living costs, new research has revealed. 

Fresh analysis from research agency Opinium found 38 percent of mortgage holders in the US will need to make cuts elsewhere to be able to keep up if mortgage payments continue to rise. 

And some 7 percent of the 2,000 Americans surveyed said they would be forced to sell their home if costs keep rising.

The Federal Reserve’s aggressive campaign to curb inflation has taken interest rates from an all-time low of 0.5 percent in April 2020 to 5.5 percent today.

The annual rate of inflation remains stubbornly above the Fed’s 2 percent target – at 3.7 percent as of latest figures from September – which is taking its toll on household budgets. 

The Federal Reserve held interest rates steady between 5.25 and 5.5 percent at its November meeting

The Federal Reserve held interest rates steady between 5.25 and 5.5 percent at its November meeting

America’s combined household debt shot up by $228 billion to $17.3 trillion in the third quarter of the year, according to figures from the Federal Reserve Bank of New York. 

Experts said the increase was driven by rampant credit card borrowing which rose by $48 billion to $1.08 trillion. 

Year-on-year squeezed Americans have seen their credit card balances rise by $154 billion – the largest increase since the Fed started tracking data in 1999.

According to the Opinium survey, almost a quarter – some 23 percent – of homeowners said their mortgage payments have a major impact on their day-to-day financial decisions, including everyday purchases and savings.

Mark Petrone, vice president of research at Opinium, said: ‘As day to day living expenses continue to climb, American mortgage holders find themselves dealing with an uncertain financial landscape. 

‘Despite interest rates left unchanged at the last Federal Reserve meeting, it was cautioned that the Fed’s campaign to bring down price growth still has ‘a long way to go,’ indicating that prices aren’t likely to come down anytime soon.’

It is a concerning sign that homeowners, many of whom are locked into low fixed-rate deals by today’s standards – are struggling. 

During the Covid-19 pandemic, borrowing rates fell to historic lows of 2 or 3 percent. 

In the last year, however, the housing market has been plagued by soaring borrowing costs – which have just begun to dip from their near-8 percent peak in recent weeks.

According to latest figures from Government-backed lender Freddie Mac on November 9, the average 30-year mortgage has dropped to 7.50 percent. 

These elevated rates mean those who have not entered the housing market are being deterred from doing so. 

According to <a href=latest figures from Government-backed lender Freddie Mac on November 9, the average 30-year mortgage has dropped to 7.50 percent” class=”blkBorder img-share” style=”max-width:100%” />

According to latest figures from Government-backed lender Freddie Mac on November 9, the average 30-year mortgage has dropped to 7.50 percent

Over two in five Americans admitted they are unlikely to buy property in the next five years due to various cost pressures, the survey found. 

Some expressed doubts about ever being able to afford a home, others said they would struggle to afford a downpayment or that interest rates are too high, and others said they would have issues keeping up with mortgage repayments.

Somebody who bought a $400,000 home in October 2021 – when rates were 3.09 percent – would pay $1,621 per month on their mortgage. This assumes they paid a 5 percent downpayment.

But at today’s rates the same owner would be forced to pay $2,657 – an increase of more than $1,000 per month.

Petrone added: ‘As consumers navigate the current economic landscape, a significant number of prospective homebuyers are hesitant about entering the housing market over the next five years. 

‘The affordability barrier looms large, causing doubt among many Americans about their prospects of ever owning a home.’

It comes as analyst Meredith Whitney warned how young people have been priced out of the housing market amid these elevated mortgage rates and surging prices. 

Whitney, who was once dubbed the ‘Oracle of Wall Street’ for successfully forecasting the 2008 financial crisis, said that younger Millennials and Gen Z have missed out on $21 trillion in equity which older generations have built in home ownership. 

Meredith Whitney, who was dubbed the 'Oracle of Wall Street', has warned how not owning homes hurts the 'avocado toast generation'

Meredith Whitney, who was dubbed the ‘Oracle of Wall Street’, has warned how not owning homes hurts the ‘avocado toast generation’

‘We are seeing record low homeownership levels for those under 38,’ she said – a group she calls the ‘avocado toast generation.’ 

‘Homeownership has been a forced savings vehicle in the US, but particularly in the last 12 or 15 years, because interest rates have effectively been at zero. We have seen $21 trillion of equity built up in homes over the last decade, which is obviously an incredible wealth creator,’ she said.

‘Those who have not participated in that have been those who haven’t owned homes – and that’s disproportionately those under 38,’ she said.

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