Senate passes temporary debt ceiling extension – what new December deadline means for mortgage rates
The Senate past a temporary extension of the debt ceiling Thursday night in a 50-48 vote, giving the government enough funds to hold out until December. The House of Representatives is expected to pass the legislation in the coming days, sending it to President Joe Biden’s office before the October 18 deadline.
Senate Majority Leader Chuck Schumer said earlier today that Democrats and Republicans have reached an agreement to prevent the United States from defaulting on its debt until the new December deadline.
“The path our fellow Democrats have taken will spare the American people any short-term crisis while definitely resolving the majority’s excuse that they lack time to address the debt limit through the 304 reconciliation process,” he said. McConnell declared in the Senate. “Now there will be no more questions, they will have all the time.”
Prior to the Senate agreement, there were concerns that interest rates would rise if the debt ceiling was not raised. However, once the extension is over, interest rates will continue to hold near their all-time lows. You can take advantage of the going rates to refinance your mortgage and reduce your monthly payments. Visit Credible to find your personalized rate.
Will mortgage payments increase?
Biden announced at a press conference on Monday that not raising the debt ceiling could lead to higher interest rates, as well as mortgage and auto payments. However, how the debt ceiling affects consumers can be quite complicated.
“In the days to come, even before the default date, people may see the value of their retirement accounts decline.” Biden said before the Senate deal. “They can see interest rates go up, which will eventually increase their mortgage payments and car payments.”
Treasury Secretary Janet Yellen previously warned of the economic impact of not raising the debt ceiling, which Congress now has until December to find a permanent solution. If lawmakers hadn’t come to a deal, higher interest rates might have been a possibility if investors and financial markets showed a flight to safety. But that may not have impacted all mortgages. When homeowners take out a home loan, it is common to get a fixed rate mortgage. Since fixed mortgage rates are set for the life of the loan, changes in the national average will not affect their payments.
However, new buyers would be subject to higher interest rates and either have higher monthly payments or would have to buy a more affordable home. Those with a variable rate mortgage might also feel the effects since their rate is usually set for the short term, say five years, and then fluctuates based on the market average.
If you want to refinance your mortgage and lower your monthly payments while rates stay low, visit Credible to find your personalized mortgage rate and see how much you could save.
HOUSING EXPERT: OCTOBER MORTGAGE RATES WILL NOT CHANGE Drastically, BUT SHOULD INCREASE
Experts warn of impacts of not raising debt ceiling
A Moody’s Analytics report released on September 21 showed the possible impact of not raising the debt ceiling. If lawmakers hadn’t come to a deal, it could have cost the United States 6 million jobs and wiped out $ 15 trillion in wealth, triggering a recession similar to that of 2008, the report warned. This highlights the importance for Congress to find a permanent debt ceiling solution by the December deadline.
“This economic scenario is cataclysmic,” said the report by Moody’s Analytics chief economist Mark Zandi and deputy director Bernard Yaros at the time. âBased on Moody’s Analytics model simulations of the US economy, the slowdown would be comparable to that experienced during the financial crisis. This means that real GDP would fall almost 4% from peak to trough, nearly 6 million jobs would be lost, and the unemployment rate would rise to almost 9%.
âTreasury yields, mortgage rates, and other consumer and business borrowing rates rise, at least until the debt limit is resolved and Treasury payments resume,â the report continued. “Even then, rates never fall back to where they were before.”
Previously, Yellen had said the debt limit must be raised by October 18. However, with the consent of the Senate, the new deadline is December 3.
If you want to refinance your mortgage when interest rates are near historic lows, you can visit Credible to see multiple mortgage lenders at once and choose the one that suits you best.
MORTGAGE RATES RISE BY MORE THAN 3% FOR THE FIRST TIME SINCE JUNE: FREDDIE MAC DATA
What to expect for interest rates
While the debt ceiling deadlock is resolved for now, a permanent solution must be found by December. If Congress raises the debt ceiling again, interest rates are likely to move very little and continue on their current path. However, the Biden administration is in trouble to rally all Senate Democrats on how to raise the debt ceiling. Senate Republicans are also at an impasse, saying Democrats must vote on their own, giving them a few extra months to work on it.
âRaising the debt limit is like paying what we already owe, what has already been earned – nothing new,â Biden said in a statement. press release issued by the White House On Monday. “It starts with a simple truth: The United States is a nation that pays its bills and always has. Since its inception, we have never failed.”
In those remarks, Biden also warned that without an increase in the debt limit, interest rates could have risen for mortgages, auto loans and credit cards and that the country’s credit rating was in jeopardy.
If you want to refinance your mortgage before the December congressional deadline, visit Credible to get prequalified in minutes without affecting your credit score. You can also talk to a mortgage expert and get all of your questions answered.
Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.