Young couples are delaying getting married because they are finding it so hard to get a mortgage to buy their first home, Janet Yellen, the chair of the Federal Reserve, warned on Wednesday as she once more signaled a historic rise in interest rates later this year.
Yellen said people were finding it so hard to secure credit from banks that “people [are] delaying marriage [because they] can’t get mortgages as easily”. She said that it is still too difficult for people to get a mortgage unless they have “pristine” credit scores.
The difficulties many face securing mortgages has caused the US home ownership rate to hit its lowest level since 1989, according to Commerce Department data. The seasonally adjusted homeownership rate dropped to 63.8% in the first quarter of 2015, compared to 65% in 2014 and 69.2% in 2005.
Young people are suffering the worst, with with ownership rates down 7.3% over the past decade for people aged 18-34.
Yellen also said she is also contacted “everyday” by retirees, who complain that they are “really suffering from rates [as] they hoped [higher interest rates] would boost their retirement income”.
Yellen’s comments came as the Federal Reserve said it was sticking with its target of raising interest rates before the end of the year – which would be the first rate rise since the 2008 financial crisis.
The Federal Open Market Committee said the US economy has been “expanding moderately” and the “pace of job gains picked up while the unemployment rate held steady”.
“No decision has been made about when the right timing is for an increase,” Yellen said in a press conference in Washington. “Certainly an increase this year is possible, we could certainly see data that would justify that.” But she warned the market not to get too hung up about when exactly the rate rise will come, saying it could be “September, or December or March”.
Following a contraction in the first quarter, the committee said the economy is on track to grow 1.8%-2% this year.
The policymakers, who have been meeting in Washington, said interest rates would be kept at near-zero for now, but would be increased if the economy continues to improve and unemployment decreases. Fed chair Janet Yellen has said she expects the Fed to raise rates in 2015. Analysts expect the hike to come in September.
“The committee expects inflation to rise gradually toward 2% over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate,” the policymakers said in a statement. “The pace of job gains picked up while the unemployment rate remained steady. On balance, a range of labor market indicators suggests that underutilization of labor resources diminished somewhat.”
Dan Greenhaus, chief strategist at BTIG, said: “The Fed statement reads a bit more optimistically regarding the economy. Things are ‘expanding moderately’ after the first quarter’s poor performance which is now thought to be ‘little changed’ rather than contracting.
“If one believes, as we do, that the Fed is getting set to hike later this year, the Fed’s dot plot plays right into that thesis. The statement does use “moderate” or “moderately” three separate times, reinforcing the Fed’s hesitancy and nervousness about the outlook. But we think they want to raise rates and the projections support that idea.
