Government Shutdown Update: What Happens Next

8 Democrats Joined 52 Republicans

On Sunday, eight Democrats crossed the aisle and voted with 52 Republicans to pass a continuing resolution to reopen the government. The measure now heads to the House, which must reconvene and vote before it can move to the President’s desk. So while progress has been made, the government is not officially open yet.

The Speaker has given all members of Congress 36 hours to return to Washington for the vote. Realistically, this means we shouldn’t expect the House to vote until late Tuesday or Wednesday. Once it passes, President Trump is expected to sign it immediately. If the vote occurs Wednesday, the government could be fully reopened by the end of the week.

How This Affects Mortgages

So far, the shutdown has had minimal impact on mortgage lending. Most of the services lenders rely on are considered essential and have continued operating. There are always unique situations—such as a borrower who was furloughed during the shutdown—but those are handled on a case-by-case basis. For example, a furloughed borrower would typically be allowed to close once the lender confirms they’re back at work.

The bigger effect will likely be in interest rate movement.

The market has been unusually flat over the last few months, with conventional rates gradually settling into the low-6% range. A major reason for this stability is the lack of government data. The bond market depends heavily on economic reports—CPI, unemployment, manufacturing, trade data, and more. Without these releases for roughly 40 days, investors have had very few catalysts to change direction.

That’s about to change.

Over the coming weeks, we’ll not only get new economic reports, but also the backlog of revisions from the past two months. With this much data hitting the market at once, we could see larger-than-normal single-day rate moves—mostly short-term reactions until the market finds equilibrium again.

What We Expect Going Forward

Initial reaction:
Markets will likely respond positively to the government reopening. A strong stock market typically pulls money away from mortgage bonds, which puts upward pressure on mortgage rates. So a small bump in rates early in the week would be expected.

Data releases:

• Consumer Price Index (CPI) comes out Thursday.

  • If inflation comes in below 3%, rates could move lower.

  • If it’s above 3%, rates could tick higher.

• Jobs data and revisions are the biggest wild card.
  Recent jobs reports have been weaker than expected. If that trend continues, it would generally put downward pressure on mortgage rates.

It’s entirely possible we see rates move up briefly on reopening optimism, then move back down as inflation and unemployment numbers roll in—essentially canceling each other out. And remember, when we talk about rate movement in this environment, we’re usually discussing changes in the tenths of a percent, not dramatic swings.

The scenario we’re watching carefully:
A combination of:

• A strong stock market surge

• Higher-than-expected inflation

• Lower unemployment

That trio would push rates higher and keep them elevated longer than what we’ve seen over the past few months.