The 30-year fixed-rate mortgage is a truly remarkable product that offers unique advantages to homeowners. Its ability to shield individuals from broader interest rate fluctuations was recently highlighted in a report from Bank of America, which utilized its internal data to showcase the contrasting spending patterns between renters and homeowners.
According to the banking giant’s findings, renters tend to have lower total card spending per household (excluding rent) compared to homeowners by approximately 2 percentage points. This disparity emphasizes the insulation provided by the 30-year fixed-rate mortgage.
The Bank of America report aligns with a similar study conducted by regional lender Fifth Third, which discovered that homeowners generally maintain higher deposit balances.
The report from the Bank of America Institute explains that since the majority of U.S. homeowners have fixed interest rates established prior to recent rate hikes, they have yet to experience the direct impact of rising rates. This means that only households who secured a mortgage since early 2022 or those with floating mortgages (representing just 1% of total mortgages outstanding prior to rate hikes) would feel the pinch.
In June, spending data for homeowners saw a positive increase of 0.8% compared to the previous year, while renters experienced a decline of 1.4%. The most substantial gap between the two groups was observed in restaurant spending, although even for renters, there was a slight positive trend. Conversely, homeowners saw a decline in furniture spending due to weakened home sales.
These findings underscore the strength of the 30-year fixed-rate mortgage and its ability to provide stability and financial advantages to homeowners.
