Will The Debt Ceiling Affect Mortgage Rates?

The national debt ceiling is due to expire this month on October 17th, and the importance of this has been downplayed because of the current government shutdown, but it is a very real issue we must also consider.

The federal debt ceiling, if not raised, can have prolonged effects on the economy and consumer confidence. The stock market could fluctuate as people worry, and interest rates on loans could increase.

In 2011, we also faced the issue of whether or not to raise the debt ceiling. The USA came within days of defaulting on its payments on loans, and we are heading in the same direction right now. The stock market crashed, essentially, as a result and household wealth was summarily affected, especially retirement assets. Interest rates spiked, which slowed economic growth.

This, plus the government shutdown, is a recipe for economic instability that we don’t need right now. Credit could freeze, the value of the dollar could decrease, mortgage rates could increase, and we could even end up on our way to another recession!

The debt ceiling is currently $16.7 trillion and it must be raised by Oct. 17, allowing the US to borrow more money, in order to avoid a potential default on the nation’s loans.

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