Government Shutdown Could Lead to Lower Mortgage Rates

APR 7, 2011 11:41am ET

Nothing good ever comes out of a government shutdown, except for lower mortgage rates. Follow my logic here. The 'Tea Party' folks in Congress hold to their principles and the GOP doesn't come to terms with Democrats. The government shuts down Friday night and both sides hold their positions, refusing to compromise. This thing drags on and local economies that depend on tourist dollars tied to national parks begin to feel the pain. Now here's the biggie: the stock market tanks and investors flee for the safety of U.S. Treasury bonds. The price of bonds spike and rates fall — including mortgage rates. Sounds like a rosy scenario, for homebuyers at least. Of course, if a homebuyer needs a Federal Housing Administration loan, that won't happen. The FHA is deemed "non-essential" and will close for business once government funding stops. Also, federal workers hoping to buy a home will be out of luck — because they are out of work.

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