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Higher Rates Create Obstacles for Millennial Homebuyers: Fitch

Higher interest rates will add stress for millennials looking to buy a home, according to an analysis from Fitch Ratings.

Rate increases have cut down millennial borrowers' mortgage capacity by 9% since the beginning of October, Fitch said Thursday.

And if rates go higher, particularly in a short period of time, they could be added to the list of factors dampening millennial homeownership that also includes tight underwriting standards, high student loan payments, rising rents and low wage growth. Those issues contributed to a lower homeownership rate among those under the age of 35, which dropped to 35% in 2016 from 41% in 2000.

"Historically low rates have been one of the few factors that have helped young adults to buy homes," Fitch wrote. The drop in mortgage capacity could therefore leave "more millennials out of what has historically been one of the most important wealth-creation mechanisms, and could contribute to long-term shifts in savings and consumption."

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