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Government Shutdown Sparks Uncertainty for Mortgage Rates and Housing Market

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BusinessHonor - US Shutdown Impacts Mortgage Market

Business Honor
07 October, 2025

Federal shutdown disrupts mortgage rates, flood insurance and home sales across the U.S.

The current U.S. government shutdown is causing waves throughout financial markets, with possible effects on mortgage rates and the overall housing market. As the shutdown started after a breakdown in efforts to pass a new bill on federal spending, Wall Street experienced small drops, and bond markets responded with a modest decline in long-term yields. This has taken some pressure off rising mortgage rates, though uncertainty remains.

With federal employees on furlough and core economic reports suspended temporarily, such as the important jobs and inflation data, the Federal Reserve interest rate decision is left uncertain. Mortgage rates, which often follow Treasury yields, have seen some relief, but analysts say volatility will persist until economic statistics resume. Realtor.com Chief Economist Danielle Hale comments that the interruption might lead to dramatic changes to interest rates when the government shutdown is over.

For consumers who buy homes, the shutdown has both challenges and opportunities. While conventional processing of mortgages is fairly immune, a big worry is the National Flood Insurance Program (NFIP), which has suspended issuing new policies. Because lenders of mortgages frequently require coverage for houses in flood zones, this might slow down or derail about 1,400 home transactions per day, particularly in high-risk areas.

In addition, furloughed federal employees can suffer financially, which can impede their ability to pay rent or mortgages, which can ultimately weaken home sales and home prices in the areas with a higher proportion of federal workers. In general, the government shutdown brings unpredictability to an already slow housing market, which has faced high home costs and higher mortgage rates. As long as it's too soon to anticipate lasting impacts, homebuyers must remain aware of how changes in the market could affect their plans.