The rise in interest rates since the election is presenting yet another obstacle to young people trying to enter the housing market.
The spike has lowered the median size mortgage that borrowers can qualify for by 9 percent, according to a new report from Fitch Ratings cited by the Wall Street Journal. It’s an added burden on top of rapidly rising house prices, which means young investors need to shell out larger down payments.
The report, released Thursday, compared the average 30-year fixed mortgage rate of 4.2 percent in the first week of January, compared with the average 3.4 percent average at the beginning of October. It found the median mortgage someone under 35 would qualify for has now dropped from a maximum $120,000 to maximum $109,000.
“Many first-time home buyers have already seen their mortgage capacity eroded,” the report said, according to the Journal. “If rates continue to rise, particularly if they rise rapidly over a short time period, they could add yet another obstacle to homeownership.”
In the wake of Trump’s victory, bond yields and mortgage rates jumped significantly. The Federal Reserve raised rates for first time during 2016 in December. Rates hit a two-year high last month, and demand for mortgages dropped significantly in the last quarter of the year.