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How Will the Government Shutdown Affect Mortgage Rates?


  • With a looming government shutdown, some investors are wondering what it could mean for mortgage rates.
  • There’s debate over whether mortgage rates would rise or fall during a shutdown.
  • Investors shouldn’t feel the need to alter their long-term portfolio strategy.
Government shutdown mortgage rates - How Will the Government Shutdown Affect Mortgage Rates?

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With the Oct. 1 deadline for an approved federal budget looming, a government shutdown seems increasingly likely. How would a shutdown impact U.S. home mortgage interest rates, though? That’s the trillion-dollar question, and not all experts agree on the most probable outcome.

What’s known for certain is that the Federal Reserve has already enacted a series of interest rate hikes. Consequently, the 30-year mortgage interest rate is approaching 8%.

Furthermore, a shutdown of the federal government on Oct. 1 means that some services would be limited or stopped altogether. Therefore, it’s important to consider what the implications might be for current and prospective homeowners as well as for stock investors.

Could a Government Shutdown Actually Reduce Mortgage Rates?

First and foremost, it must be acknowledged that a government shutdown wouldn’t make it impossible to get a mortgage loan. Rocket Mortgage, a company affiliated with Rocket Companies (NYSE:RKT), assured that the Department of Housing and Urban Development (HUD) would continue to process Federal Housing Administration (FHA) loans. Moreover, the Department of Veterans Affairs (VA) would “continue its loan origination role as of the latest update.”

The immediate impact on mortgage rates, however, isn’t known yet. On one hand, Shant Banosian, a branch manager and senior loan officer at Guaranteed Rate, predicts that a government shutdown “would layer additional risk into the system and would drive rates up further past 8%, from their current levels of around 7.5%.”

In contrast, Chen Zhao, who leads the economics team at Redfin (NASDAQ:RDFN), observed that Treasury yields usually fall during a government shutdown. The result, Zhao posits, would be lower mortgage rates.

What Should You Do Now?

It’s probably not constructive to try to guess what would happen to mortgage rates if there’s a government shutdown. After all, shutdowns have always been resolved sooner or later.

Besides, the housing market is complex. A government shutdown isn’t the only factor that would affect mortgage rates. So, there’s no need to hurry to buy or sell your home. As for stock investors, it’s probably best just to stick to your current portfolio strategy, stay diversified and always have an exit plan in place.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Article printed from InvestorPlace Media, https://investorplace.com/2023/09/how-will-the-government-shutdown-affect-mortgage-rates/.

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