Will a Default by the US Government lead to an increase in Mortgage Rates?
With the debt ceiling negotiations looming many are wondering how a default by the US Government would affect their personal finances. We at The Glover Team are especially interested in how it may affect our buyers, sellers, and the overall real estate market.
So, will a default by the US Government lead to an increase in mortgage rates? Yes, a US debt default would likely lead to higher mortgage rates. When the US government defaults on its debt, it signals to investors that the country is not a reliable borrower. This can lead to higher interest rates on all types of loans, including mortgages. In addition, a debt default could cause the stock market to crash, which would further erode investor confidence and lead to higher mortgage rates.
According to a study by Zillow, a US debt default could cause mortgage rates to rise by as much as 2 percentage points. This would make it more expensive for people to buy homes, and could lead to a decline in home sales.
The impact of a US debt default on mortgage rates would depend on a number of factors, including the severity of the default and the length of time it takes to resolve. However, it is clear that a default would have a negative impact on the housing market and make it more expensive for people to buy homes.
Here are some of the reasons why a US debt default would likely lead to higher mortgage rates:
- Investors would demand higher interest rates to compensate for the increased risk of default.
- The Federal Reserve would likely raise interest rates to try to control inflation, which would also lead to higher mortgage rates.
- The stock market would likely crash, which would further erode investor confidence and lead to higher mortgage rates.
A US debt default would be a major economic event with far-reaching consequences. It would make it more expensive for people to borrow money, which would slow down the economy and could lead to a recession. It would also make it more difficult for the government to fund its programs, which could lead to cuts in services or tax increases.
A US debt default is a serious possibility, and it is important to be prepared for the potential consequences. If you are thinking about buying a home, you may want to consider locking in a mortgage rate now, before rates rise. Contact The Glover Team to get started today!
