Two days from now, both political parties must come to an agreement before the government exceeds the debt ceiling. Should this scenario unfold, increases will be felt across mortgage interest rates, according to the Wall Street Journal’s Market Watch.
Although change has yet to occur, analysts predict interest rate percentages could go up by one to two points in just a few days. The shift may last just a short period or perhaps longer, depending on the government’s course of action.
Should the government not make payments soon enough or make an effort to stabilize the mortgage market, rates may stay high, resulting in fewer applications and a halt to the housing market’s gradual recovery made over the past year.
All types of loans may feel the effects. Ordinarily-low initial ARM interest would increase, while one-month fixed loans will experience a similar impact. Long-term, fixed-rate loans may see their percentage points nearly double from the current 1.53 to Recession levels. All depend on the Treasury yield, which will increase if the government defaults.
Because an agreement has not been reached, lenders, brokers, and borrowers must wait to see what unfolds over the next week.
The government shutdown began on September 30, and at the time, lenders who submitted applications for processing and approval days before have had to wait. As many government offices and programs remain closed, with workers furloughed, the IRS – which, these days, plays an important role in processing mortgage applications – cannot verify borrowers’ tax information.
As a result, mortgage applications that began before the shutdown remain incomplete, with lenders either resorting to older employment verification methods or simply submitting and predicting a backlog once the IRS resumes its services. Borrowers, meanwhile, may have to deal with increased rates once these held up applications get processed.