The potential of young Americans to become first-time home buyers has been weakened by the rise in mortgage rates.
Fitch Ratings says that the mortgage capability of millennials has slipped 9 per cent since rates started edging up late last year and hit a two-year high at the start of 2017.
The firm calculates that the rise in rates means that the median value of a home that a borrower under 35 could afford dropped from $120,000 in September 2016 to $109,000 now. Meanwhile home prices are rising.
As well as the effect on the housing market from fewer first-time buyers, Fitch notes that if millennials miss out on building home equity in their younger years, it will have a long-term financial impact.
Consumers more accepting of mortgage robo-advisors
The disruptive influence of technology is highlighted by a new survey which shows growing acceptance of so-called robo-advisors.
The global poll which includes the US and Canada, by professional services firm Accenture, reveals that seven out of ten consumers welcome the idea of using automated advice services but there are still important roles for humans!
Robo-advice is most accepted for investments (78 per cent), choosing insurance products (74 per cent) or a bank account (71 per cent) but for mortgage advice, most respondents (61 per cent) said they would prefer to deal with a human advisor.
“While financial institutions may expect to benefit from internal cost reduction by providing customers with a ‘robo’ option, our research found that consumers also expect first-class human interaction,” said Piercarlo Gera, senior managing director, Accenture Financial Service.
As well as for mortgages, most consumers would also prefer to deal with a person for complaints (68 per cent).
The survey also reveals that consumers are becoming more open to buying financial products from non-traditional outlets with almost a third saying they would consider getting financial advice from Google, Facebook or Amazon.
While the Canadian responses show that 56 per cent are willing to use a robo-advisor, Gera says the future appears to be a hybrid model.
“Successful financial services firms will therefore need a "phygital" strategy that seamlessly integrates technology, branch networks and staff to provide a service that combines physical and digital capabilities and gives consumers a choice," he concluded.
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