Buffalo, NY - As questions mount about what mortgage rates will look like following the government shutdown, Steven Gattuso, assistant professor of economics at Canisius University and co-chief investment officer at Courier Capital, says the outcome will depend largely on fiscal decisions and market forces rather than direct Federal Reserve action.
Federal Reserve's role in mortgage rate fluctuations
“Many believe that the Federal Reserve has influence over mortgage rates and that relationship is actually indirect and rather weak,” Gattuso said. “The foundation of typical mortgage rates is the 10-year U.S. Treasury rate, whose level is determined more by market forces. Earlier this year when the Federal Reserve lowered rates, the 10-year Treasury yield actually went up.”
Key driver of mortgage trends
Gattuso noted that broader fiscal conditions and inflation expectations play a larger role.
“A larger influence on the 10-year comes from the government’s fiscal situation and expected inflation,” he said. “The impact on mortgage rates from the government shutdown will depend on how it is settled. If there is another large expenditure as part of the settlement — as the initial request is for $1.5 trillion — then there is the potential for the 10-year rate to rise. A larger fiscal deficit puts upward pressure on longer rates.”
Inflation expectations, fiscal policy shape long-term rates
He added that inflation expectations will also be key.
“As they wane, rates may decrease,” Gattuso said. “Finally, mortgage rates also are impacted by the spread between the 10-year rate and offered mortgage rates. The greater the perceived risk, the greater the difference between the two. Less risk makes the difference between the two smaller.”
Gattuso brings more than 25 years of investment industry experience to his academic role. A Chartered Financial Analyst (CFA), Certified Financial Planner (CFP), and Certified Management Accountant (CMA), he directs the Golden Griffin Fund, a real-money, student-managed investment fund at Canisius University that provides experiential learning in portfolio management.
A sought-after commentator on emerging market trends, Gattuso has been featured in national outlets such as MoneyGeek and WalletHub, offering expert commentary on personal finance, loan strategies, and investment market dynamics. His recent podcast appearances have explored topics including artificial intelligence in investing and the future of the housing market.
