Millennium millionaires are temporarily suspending larger purchases as interest rates and inflation rise, according to CNBC’s Millionaire Survey.
According to the survey, almost half of the millennial millionaires say that higher borrowing costs cause them to delay buying a car, and 44% say that higher interest rates have caused them to delay the purchase of a house. More than a third said inflation caused them to delay a trip or vacation.
The CNBC Millionaire Survey, which measures those with investable assets of $ 1 million or more, suggests that inflation and rising borrowing costs are moving up the wealth ladder. As inflation hits the middle class and low-income groups hardest, rising interest rates begin to weigh on the richer and younger consumers, especially for large ticketing products.
According to the study, millennials are three times more likely to cut back on larger purchases than their counterparts to the baby boomer.
“Millennial millionaires are clearly dealing with something they have never experienced,” said George Walper, president of Spectrem Group, which conducts the study with CNBC. “As a result, they change their behavior and spending plans.”
Spectrem Group and the survey consider respondents born in 1982 or later, those currently 40 years and under, 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 prices on luxury goods such as restaurants, airline tickets, hotels and even some monthly cards. According to the study, 39% of millennial millionaires have reduced their eating habits due to rising inflation. 36 percent reduced their vacations and 22% reduced their driving time.
At the same time, interest rate hikes by the Federal Reserve have increased borrowing costs, particularly for homes and cars. The central bank on Wednesday raised its benchmark rate to a range of 1.5% to 1.75%, saying another rise could come in July.
Two-thirds of millennial millionaires surveyed said they were “less likely than a year ago to borrow money” because of rising interest rates. It can be compared to only 40% for baby boomers.
Forty-four percent of millennial respondents said higher prices caused them to delay buying a new home, compared to only 6% of baby boomers. Nearly half of the millennial millionaires said they postpone buying a car because of higher prices, more than double the number of baby boomers.
Millennials are generally the main drivers of growth in home and car sales.
“Millennials, like everyone else, are experiencing that the mortgages they were considering in January are now more than double,” Walper said.
CNBC’s millionaire survey was conducted in May, before the Fed’s last rate hike. She surveyed about 750 respondents who said they were the economic decision makers or jointly involved in the economic decision making in their household.
However, millennials seem more optimistic about their investments than older millionaires: 55% of millennials millionaires said inflation would last less than a year, compared to nearly two-thirds of baby boomers who said it would last at least a year or two. . Forty percent of millennials surveyed plan to buy more stocks as inflation rises, compared to just 11% of baby boomers.
Millennials are also more optimistic about the impact of inflation on their stock returns: Nearly 90% of millennial respondents are “confident” or “somewhat convinced” of the Fed’s ability to control inflation – a stark contrast to the 38% of baby boomers who are “not at all confident.”
More than 70% of millennial millionaires believe the economy will be stronger or even “much stronger” by the end of 2022, compared to two-thirds of baby boomers who said it would be weaker or “much stronger”. weaker. “Millennials also said asset markets will end the year above 2021 levels – a show of bullish confidence with the S&P 500 falling 20% for the year so far.
58 percent of millennial millionaires said asset markets would end the year with at least 5%, with 39% expecting double-digit gains. In contrast, 44% of millionaire baby boomers expect the market to fall in double digits.