The latest BMO Real Financial Progress Indexfinds current interest rates are hindering most prospective homebuyers from purchasing a home, with nearly three fourths (71%) waiting on rate cuts before entering the market – up from 64% this time last year. Among those who do plan to buy a home, nearly one-third (30%) say they plan to pull money from their 401(k)-retirement plan to help cover the cost.

Two years after the Federal Reserve began raising interest rates – in turn, leading to an increase in mortgage rates – and amid elevated home prices with limited inventory, Americans will likely have to hold out through another summer for potential relief, according to BMO Economics.

"In light of persistent strength in the U.S. economy, as well as stubborn underlying inflation, the market has been pushing its expectation for Fed rate cuts into the autumn," said Michael Gregory, Deputy Chief Economist at BMO. "Looking ahead to 2025, we expect the Fed to stick to a gradual rate cut pattern."

BMO's survey also outlines Americans' current views around homeownership and highlights a desire for more affordability – from cost of living and inflation to rising insurance costs and climate-related concerns:

• Buying a home still part of the "American Dream": Most (67%) say owning a home is one of their biggest aspirations in life. Most Millennials and Gen Z (73% on both counts) report it is one of their most coveted goals.

• Most aspiring homeowners remain distant from reaching homeownership milestone: 73% of aspiring homeowners say the goal of owning their own home seems unattainable.

• More younger Americans pulling from 401(k): 30% of aspiring homeowners say they plan to use their 401(k)-retirement plan toward their home purchase. Millennials (31%) and Gen Z (34%) are more likely to say they will pull out money early compared to Gen X (25%) and Baby Boomers (16%).

• Home insurance costs affecting purchasing power: 43% say rising home insurance costs may impact their ability to keep or buy a home. Gen Z feel most impacted by these costs (60%), followed by Millennials (55%).

• Climate-related factors impacting where Americans live: 41% say environmental deterrents such as water availability, storms, flooding, heatwaves, and wildfires will impact where they choose to live in the next five years. Gen Z (58%) are more likely to report this will impact where they live followed by Millennials (53%).

• Cost of living and housing a concern: 60% say their concerns about cost of living have increased over the past three months, while 68% say housing costs are causing financial anxiety.

"It's clear that Americans are feeling the strain of elevated rates, and many are uncertain about how to go about navigating the ever-evolving housing market," said Thomas Parrish, Head of U.S. Retail Lending at BMO. "It's critical, especially during periods of high rates, for customers to engage a mortgage advisor who can guide potential buyers and sellers through the homebuying journey, determine suitable budgets, and dispel common misconceptions about the pathways to homeownership – even if it currently feels out of reach. We believe in sustainable homeownership, underscored by a thorough understanding of the associated expenses and thoughtful budgeting practices to keep people on track to reach their goals and achieve real financial progress."

Housing costs on par with credit card debt as a barrier to real financial progress with most lacking a financial plan

When it comes to factors that are preventing Americans from making real financial progress, housing costs are just as much an impediment as credit card debt (30% on both counts). Additionally, 81% say their overall financial situation causes financial anxiety. Overall, 45% of Americans say they are making real financial progress – slightly more than this time last year (42%).

Despite most setting financial goals for themselves (74%), many are lacking a roadmap to help reach them with only 32% having a written financial plan and 40% setting a yearly household budget.

"Creating a budget is not just about managing expenses; it's about taking control of your financial future," said Paul Dilda, Head of Consumer Strategy at BMO. "It provides the blueprint for achieving your goals, whether it's buying a home, saving for retirement, or paying off debt. With a clear plan in place, you can make informed decisions, prioritize your spending, and ultimately, make real financial progress."

BMO helps customers stay on track and make progress

In addition to creating a budget and sticking to it, BMO offers the following tips to help make real financial progress and navigate rising costs of living:

• Build a budget and review spending and financial statements at least once a month.

• Look for recurring "hidden" expenses, such as forgotten subscriptions, and cancel those you don't use or need.

• Regularly meet with your banker or financial advisor to make sure your savings and payment patterns are on track to reach both near- and long-term goals.

• Set up a savings goal and recurring savings transfers into an account – no matter the amount – which will provide a sense of progress and motivation to achieve your savings goals.

Additionally, BMO offers budgeting and savings tools, resources, and programs that are also helpful to customers throughout their homebuying journey:

• Mortgage calculator tools: Homebuyers can find out what payments will be and how to pay down principal faster with specific calculators for Fixed Rate Mortgage Payments, Adjustable-Rate Mortgage (ARM) Payments, and Extra Payments. BMO also offers a Budget, Down Payment, Rent or Own, Closing Costs and Compare Loans calculators.

• Request a Prequalification: Receive a free estimate of how much you may be able to afford on a home.

• Intuitive Online Loan Experience: A simple and fast application process with the ability to provide and receive all documentation electronically including closing or refinancing your loan digitally.

• BMO Total Look: Customers can easily view, track and manage their BMO and non-BMO financial information, including mortgages, checking and savings accounts, credit cards, investments, loans and more.

• BMO CreditView: No-fee, no-impact access to your credit score so you can start monitoring and building credit to potentially save more by getting better interest rates on a home or auto loan.

• BMO Savings Builder Account: Receive rewards for reaching specific savings milestones, set and track personalized financial goals and monitor progress.

• BMO Real Financial Progress Hub: A free digital resource that allows customers to easily access personal finance advice and guidance, as well as tools and resources to reach their own specific financial goals.

• BMO Welcome Home Grant Program: The program provides eligible homebuyers in underserved communities up to $13,000 in down payment and closing cost assistance in select cities and regions. The grants may also be combined with additional down payment assistance programs to receive up to $25,000

  in combined assistance.

To find out how BMO helps customers make financial progress, visit: https://www.bmo.com/us.