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Millennial millionaires are delaying home, automobile purchases as a consequence of inflation

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Millennial millionaires are temporarily shelving major purchases as rates of interest and inflation rise, based on CNBC’s Millionaire Survey.

Nearly half of millennial millionaires say higher borrowing costs are causing them to delay buying a automobile, and 44% say higher rates of interest have caused them to delay purchasing a house, based on the survey. Greater than a 3rd said inflation has caused them to delay a visit or vacation.

The CNBC Millionaire survey, which surveys those with investible assets of $1 million or more, suggests that inflation and rising borrowing costs are working their way up the wealth ladder. While inflation hits the middle-class and lower-income groups hardest, rising rates of interest are beginning to squeeze more affluent, younger consumers, especially for big-ticket items.

Millennials are thrice more prone to be cutting back on big purchases compared with their baby boomer counterparts, based on the survey.

“The millennial millionaires are clearly coping with something they’ve never experienced,” said George Walper, president of Spectrem Group, which conducts the survey with CNBC. “In consequence, they’re changing their behaviors and spending plans.”

Spectrem Group and the survey consider respondents born in 1982 or later, those currently aged 40 and younger, to be millennials. Respondents born between 1948 and 1965, aged 57 to 75, were considered baby boomers.

Inflation and rising rates have created two separate but related spending constraints for affluent consumers.

Inflation has driven up the costs of luxuries reminiscent of dining out, plane tickets, hotels and even certain monthly subscriptions. In response to the survey, 39% of millennial millionaires have in the reduction of on dining out because of upper inflation. Thirty-six percent have in the reduction of on vacations, and 22% have cut down on driving.

At the identical time, the Federal Reserve’s rate of interest hikes have jacked up the associated fee to borrowing, especially for homes and cars. The central bank on Wednesday raised its benchmark rate to a variety of 1.5%-1.75% and said one other hike could are available July.

Two-thirds of millennial millionaires surveyed said they’re “less likely than a 12 months ago to borrow money” as a consequence of higher rates of interest. That compares with only 40% for baby boomers.

Forty-four percent of millennial respondents said higher rates have caused them to delay purchasing a recent home, compared with only 6% of baby boomers. Nearly half of millennial millionaires said they’re delaying purchase of a automobile because of upper rates — greater than double the speed of baby boomers.

Millennials are typically key drivers of sales growth for each homes and cars.

“Millennials, like everyone else, are seeing that the mortgages they were in January at the moment are greater than twice as much,” Walper said.

CNBC’s Millionaire Survey was conducted in May, before the Fed’s latest rate hike. It surveyed roughly 750 respondents who reported that they’re the financial decision-makers or share jointly in financial decision-making inside their households.

Millennials appear more optimistic with their investments than older millionaires, nevertheless: 55% of millennial millionaires said inflation will last lower than a 12 months, compared with nearly two-thirds of baby boomers who said it should last at the least a 12 months or two. Forty percent of millennials surveyed plan to purchase more stocks as inflation accelerates, compared with just 11% of boomers.

Millennials are also more sanguine about inflation’s impact on their stock returns: Nearly 90% of millennial respondents are “confident” or “somewhat confident” within the Fed’s ability to administer inflation — a stark contrast to the 38% of baby boomers who’re “in no way confident.”

Greater than 70% of millennial millionaires consider the economy will probably be stronger and even “much stronger” at the top of 2022, compared with two-thirds of boomers who said it should be weaker or “much weaker.” Millennials also said asset markets will end the 12 months higher than 2021 levels — a bullish show of confidence with the S&P 500 down 20% for the 12 months to this point.

Fifty-eight percent of millennial millionaires said asset markets will end the 12 months up at the least 5%, with 39% expecting double-digit gains. In contrast, 44% of millionaire boomers expect the market to say no double digits.

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