10/07/2025
What a Government Shutdown Has to Do With Your Mortgage Rate?
Before becoming a loan officer, I was puzzled when I first learned that mortgage rates were connected to the 10-year Treasury bond yield.
It didn’t make sense at first — what does government debt have to do with buying a home?
Now, I find myself explaining this a lot to my clients because many believe mortgage rates are tied to the Federal Funds Rate (the rate the Federal Reserve sets for banks).
They’re actually not — at least not directly.
Here’s a simple breakdown 👇
Think of the 10-year Treasury bond as the U.S. government’s IOU.
Investors buy those IOUs because they’re considered one of the safest places to park money.
Mortgage lenders watch that bond yield when setting your home loan rate — and they usually move in the same direction.
When bond yields go up, mortgage rates tend to go up too.
When yields go down, mortgage rates usually follow.
Now… add a government shutdown into the mix.
Investors may get nervous about political gridlock and start selling their bonds, which drives prices down.
When bond prices fall, yields go up to make those bonds more attractive to new investors who now earn a higher return for taking on the uncertainty.
That’s why, during times of political dysfunction, you might see yields rise — and mortgage rates can follow.
At the same time, FHA, VA, and USDA loans could see delays because government staff handling them are furloughed.
Even flood insurance policies (required for some homes) might not be processed — holding up closings.
The result?
🏠 A government shutdown can stall real estate transactions, and if bond yields spike, it can make borrowing more expensive right when buyers are already stretched thin.
These events don’t happen often — but when they do, it’s important to understand the moving pieces so you can make the best decisions for your home or investment property.
If you’re wondering how this could impact your mortgage, refinance, or investment strategy, let’s connect.
📈 Staying informed is the best way to stay ahead.
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