{"id":7484,"date":"2023-05-11T18:32:16","date_gmt":"2023-05-11T22:32:16","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/so-you-think-6-mortgage-rates-are-too-high-heres-how-bad-it-could-get-if-the-u-s-defaults-on-its-debt\/"},"modified":"2023-05-11T18:32:17","modified_gmt":"2023-05-11T22:32:17","slug":"so-you-think-6-mortgage-rates-are-too-high-heres-how-bad-it-could-get-if-the-u-s-defaults-on-its-debt","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=7484","title":{"rendered":"So you think 6% mortgage rates are too high? Here\u2019s how bad it could get if the U.S. defaults on its debt."},"content":{"rendered":"

Brace yourself.<\/p>\n

If the federal government defaults on its debts, mortgage rates would climb, home sales would plummet and a housing market that\u2019s already unaffordable for many potential buyers would get much farther out of reach, according to a new analysis from Zillow.<\/p>\n

\n

The real-estate company\u2019s projections, released Thursday, come weeks ahead of the June 1 \u201cX-date.\u201d That\u2019s the earliest date when the government could run out of its ability to pay all its bills and debt obligations if there\u2019s no political deal to raise the government\u2019s debt ceiling.<\/p>\n

President Joe Biden and House Speaker Kevin McCarthy are scheduled to meet Friday to continue negotiations to raise the country\u2019s borrowing limits.<\/p>\n

Zillow says a default is \u201cvery unlikely,\u201d a view shared by many political and market observers, despite the Washington D.C. gamesmanship. But as the X-date approaches, Zillow is adding to the projections of what Americans\u2019 financial lives could look like in the wake of a default that hypothetically lasted one to two months, saying there would be a \u201cdeep freeze\u201d in the market.<\/p>\n

<\/p>\n
\n

\n \u201c<\/span>A 30-year fixed mortgage would peak at 8.4% in September if a default occurred, according to Zillow.\u201d<\/span>\n <\/p>\n<\/p><\/div>\n<\/p><\/div>\n

A 30-year fixed mortgage would peak at 8.4% in September if a default occurred, according to Zillow.<\/p>\n

That would be approximately two percentage points higher than current rates. The 30-year fixed mortgage edged down to an average 6.35% as of Thursday, according to Freddie Mac
\n FMCC,
\n +0.87%<\/bg-quote>.<\/span>
\n A week earlier, the 30-year rate averaged 6.39%.<\/p>\n

Mortgage rates tend to be linked with the yield on 10-year Treasury notes
\n TMUBMUSD10Y,
\n 3.388%<\/bg-quote>.<\/span>
\n If Treasurys go from a safe haven to an asset with some default risk, or risk of a delayed payment, their price would go down and their yield would increase \u2014 pushing up mortgage rates, and all the other consumer and business financing that\u2019s benchmarked against the Treasurys.<\/p>\n

Rising risk in Treasurys would translate to rising costs for homebuyers.<\/p>\n

Without a default, Zillow estimates an average mortgage payment of $1,701 in September. But if a default did<\/em> occur, the typical September mortgage payment would climb to $2,079. <\/p>\n

That\u2019s a 22% increase in cost for homebuyers, the projection noted.<\/p>\n

While a default would warp interest rates, Zillow said increased unemployment and economic uncertainty would also damage buyer demand.<\/p>\n

All told, there would be 700,000 fewer existing home sales between July 2023 and December 2024, the projections noted. At the lowest point, there would be 23% fewer existing home sales in September, Zillow said.<\/p>\n

A default would be a \u201cself-inflicted disaster,\u201d said Jeff Tucker, Zillow\u2019s senior economist.<\/p>\n

\u201cIt is fair to say that hundreds of thousands of prospective buyers would be pushed out of the market in this scenario,\u201d Tucker said. Nearly half of home buyers last year were looking for their first home, he noted.<\/p>\n

Read also:<\/strong> What happens if the U.S. defaults on its debt? How would it impact your savings, cash investments and 401(k)? Brace yourself.<\/p>\n

Home values could drop 5% lower, the projections said. That might be a glimmer of comfort for homeowners. But it would be another barrier for buyers who faced steeper rates while prices didn\u2019t sink.<\/p>\n

Even though housing inventory has been slim and interest rates have climbed since last year, one gauge said there\u2019s been more consumer optimism creeping into the housing market this spring.<\/p>\n

In April, an ongoing Fannie Mae gauge of homebuyer sentiment said 22% of polled consumers were expecting mortgage rates to decrease, compared to 12% who felt the same way in March.<\/p>\n

The Zillow projections echo other outlooks on what could lay ahead if the government can\u2019t pay all its bills at least for a time \u2014 and rattle financial markets in the process.<\/p>\n

\u201cTreasury yields, mortgage rates, and other consumer and corporate borrowing rates would initially spike, until the debt limit is resolved [and] decline during the subsequent deep recession, but ultimately remain elevated as investors demand compensation for the risk of a future breach,\u201d according to March research from Moody\u2019s Analytics
\n MCO,
\n -0.52%<\/bg-quote>.<\/span>\n <\/p>\n

The economy could lose 7 million jobs, and a stock-market selloff would erase $10 trillion in household wealth, the note said.<\/p>\n

But all these projections are estimates based on what could<\/em> happen. At Zillow, Tucker said there\u2019s \u201cmuch uncertainty\u201d in the company\u2019s estimates but \u201clittle doubt that a default would be a major negative shock to housing market activity.\u201d<\/p>\n

There are, however, other opposing views. Any default would have \u201cno impact if it is only a short duration,\u201d said Lawrence\u00a0Yun, chief economist and senior vice president of research at the National Association of Realtors. A short length counts as \u201cone week or even a month\u201d and that \u201cmay be tolerated,\u201d he said. <\/p>\n

Investors know the U.S. is a country that \u201chas the capacity to pay up, though there will be a bit of circus theatrics along the way,\u201d Yun said.<\/p>\n

During previous government shutdowns, federal workers \u201cdid not panic knowing missed paid checks will be recovered once the government was reopened.\u201d\u00a0<\/p>\n

Yun said \u201cthe same goes for debt default. I do not believe a missed interest payment will lead to panic, because investors understand they will be made whole once the debt ceiling is raised later.\u201d<\/p>\n

Others, including Treasury Secretary Janet Yellen, would beg to differ. Yellen has said \u201cfinancial and economic chaos would ensue.\u201d <\/p>\n

Yun said he disagrees with Yellen on the short-term impact, he understands Yellen \u201cwants to fulfill commitments.\u201d<\/p>\n

Zillow Group Inc. shares are up more than 45% year to date. The Dow Jones Industrial Average
\n DJIA,
\n -0.66%<\/bg-quote>
\n is up 0.5% in that time and the S&P 500
\n SPX,
\n -0.17%<\/bg-quote>
\n is up more than 7%.<\/p>\n

Aarthi Swaminathan contributed to this report<\/em>.<\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Brace yourself. If the federal government defaults on its debts, mortgage rates would climb, home sales would plummet and a housing market that\u2019s already unaffordable for many potential buyers would get much farther out of reach, according to a new analysis from Zillow. The real-estate company\u2019s projections, released Thursday, come weeks ahead of the June […]<\/p>\n","protected":false},"author":1,"featured_media":7485,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-7484","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nSo you think 6% mortgage rates are too high? Here\u2019s how bad it could get if the U.S. defaults on its debt. | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Brace yourself.If the federal government defaults on its debts, mortgage rates would climb, home sales would plummet and a housing market that\u2019s already\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=7484\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"So you think 6% mortgage rates are too high? Here\u2019s how bad it could get if the U.S. defaults on its debt. | iFintechWorld\" \/>\n<meta property=\"og:description\" content=\"Brace yourself.If the federal government defaults on its debts, mortgage rates would climb, home sales would plummet and a housing market that\u2019s already\" \/>\n<meta property=\"og:url\" content=\"https:\/\/ifintechworld.com\/?p=7484\" \/>\n<meta property=\"og:site_name\" content=\"iFintechWorld\" \/>\n<meta property=\"article:published_time\" content=\"2023-05-11T22:32:16+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-05-11T22:32:17+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/1683844336_social.jpeg\" \/>\n\t<meta property=\"og:image:width\" content=\"1280\" \/>\n\t<meta property=\"og:image:height\" content=\"640\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"News Room\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"News Room\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/ifintechworld.com\/?p=7484#article\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=7484\"},\"author\":{\"name\":\"News Room\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\"},\"headline\":\"So you think 6% mortgage rates are too high? Here\u2019s how bad it could get if the U.S. defaults on its debt.\",\"datePublished\":\"2023-05-11T22:32:16+00:00\",\"dateModified\":\"2023-05-11T22:32:17+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=7484\"},\"wordCount\":965,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"keywords\":[\"Featured\"],\"articleSection\":[\"News\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/ifintechworld.com\/?p=7484#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/ifintechworld.com\/?p=7484\",\"url\":\"https:\/\/ifintechworld.com\/?p=7484\",\"name\":\"So you think 6% mortgage rates are too high? Here\u2019s how bad it could get if the U.S. defaults on its debt. | iFintechWorld\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/#website\"},\"datePublished\":\"2023-05-11T22:32:16+00:00\",\"dateModified\":\"2023-05-11T22:32:17+00:00\",\"description\":\"Brace yourself.If the federal government defaults on its debts, mortgage rates would climb, home sales would plummet and a housing market that\u2019s already\",\"breadcrumb\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=7484#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/ifintechworld.com\/?p=7484\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/ifintechworld.com\/?p=7484#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/ifintechworld.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"So you think 6% mortgage rates are too high? Here\u2019s how bad it could get if the U.S. defaults on its debt.\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/ifintechworld.com\/#website\",\"url\":\"https:\/\/ifintechworld.com\/\",\"name\":\"Repay Down\",\"description\":\"Latest Personal Finance News, Tips and Updates\",\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/ifintechworld.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/ifintechworld.com\/#organization\",\"name\":\"Repay Down\",\"url\":\"https:\/\/ifintechworld.com\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"width\":558,\"height\":90,\"caption\":\"Repay Down\"},\"image\":{\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\",\"name\":\"News Room\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"caption\":\"News Room\"},\"sameAs\":[\"https:\/\/ifintechworld.com\"],\"url\":\"https:\/\/ifintechworld.com\/?author=1\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"So you think 6% mortgage rates are too high? Here\u2019s how bad it could get if the U.S. defaults on its debt. | iFintechWorld","description":"Brace yourself.If the federal government defaults on its debts, mortgage rates would climb, home sales would plummet and a housing market that\u2019s already","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/ifintechworld.com\/?p=7484","og_locale":"en_US","og_type":"article","og_title":"So you think 6% mortgage rates are too high? Here\u2019s how bad it could get if the U.S. defaults on its debt. | iFintechWorld","og_description":"Brace yourself.If the federal government defaults on its debts, mortgage rates would climb, home sales would plummet and a housing market that\u2019s already","og_url":"https:\/\/ifintechworld.com\/?p=7484","og_site_name":"iFintechWorld","article_published_time":"2023-05-11T22:32:16+00:00","article_modified_time":"2023-05-11T22:32:17+00:00","og_image":[{"width":1280,"height":640,"url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/1683844336_social.jpeg","type":"image\/jpeg"}],"author":"News Room","twitter_card":"summary_large_image","twitter_misc":{"Written by":"News Room","Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/ifintechworld.com\/?p=7484#article","isPartOf":{"@id":"https:\/\/ifintechworld.com\/?p=7484"},"author":{"name":"News Room","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61"},"headline":"So you think 6% mortgage rates are too high? Here\u2019s how bad it could get if the U.S. defaults on its debt.","datePublished":"2023-05-11T22:32:16+00:00","dateModified":"2023-05-11T22:32:17+00:00","mainEntityOfPage":{"@id":"https:\/\/ifintechworld.com\/?p=7484"},"wordCount":965,"commentCount":0,"publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"keywords":["Featured"],"articleSection":["News"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/ifintechworld.com\/?p=7484#respond"]}]},{"@type":"WebPage","@id":"https:\/\/ifintechworld.com\/?p=7484","url":"https:\/\/ifintechworld.com\/?p=7484","name":"So you think 6% mortgage rates are too high? Here\u2019s how bad it could get if the U.S. defaults on its debt. | iFintechWorld","isPartOf":{"@id":"https:\/\/ifintechworld.com\/#website"},"datePublished":"2023-05-11T22:32:16+00:00","dateModified":"2023-05-11T22:32:17+00:00","description":"Brace yourself.If the federal government defaults on its debts, mortgage rates would climb, home sales would plummet and a housing market that\u2019s already","breadcrumb":{"@id":"https:\/\/ifintechworld.com\/?p=7484#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/ifintechworld.com\/?p=7484"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/ifintechworld.com\/?p=7484#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/ifintechworld.com\/"},{"@type":"ListItem","position":2,"name":"So you think 6% mortgage rates are too high? Here\u2019s how bad it could get if the U.S. defaults on its debt."}]},{"@type":"WebSite","@id":"https:\/\/ifintechworld.com\/#website","url":"https:\/\/ifintechworld.com\/","name":"Repay Down","description":"Latest Personal Finance News, Tips and Updates","publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/ifintechworld.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/ifintechworld.com\/#organization","name":"Repay Down","url":"https:\/\/ifintechworld.com\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","width":558,"height":90,"caption":"Repay Down"},"image":{"@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61","name":"News Room","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","caption":"News Room"},"sameAs":["https:\/\/ifintechworld.com"],"url":"https:\/\/ifintechworld.com\/?author=1"}]}},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/7484","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=7484"}],"version-history":[{"count":1,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/7484\/revisions"}],"predecessor-version":[{"id":7486,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/7484\/revisions\/7486"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/media\/7485"}],"wp:attachment":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7484"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=7484"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=7484"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}