2023-05-11 22:38:00
Another potential risk to the U.S. economy, should the federal government default, is higher mortgage rates.
Without the debt ceiling hike, mortgage rates could rise to 8.4%, a 22% increase in average household mortgage payments and a slump in real estate sales, according to a report by property firm Zillow. If you borrow $500,000 at 6.3% interest, your monthly payment will be about $3,095, but if you borrow at 8.4%, it will exceed $3,800.
Geoff Tucker, senior economist at Ziro, said a U.S. default could “suffer a severe cooling in the market.”
Mortgage rates have been above 6% for months as the Fed tightens monetary policy to fight inflation. The real estate boom caused by the new coronavirus has receded, and both buyers and sellers are maintaining a wait-and-see attitude due to rising interest rates.
First-time buyers are finding it particularly difficult to buy, and higher interest rates will only make things worse, Tucker warned.
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