Higher mortgage rates are another potential risk facing the economy if the US defaults on its debt.

Mortgage rates could soar to 8.4% if the debt ceiling isn’t raised, pushing the mortgage payment on a typical home 22% higher and cooling property sales, according to a report from the real estate firm Zillow. Borrowing $500,000 at 8.4% would mean a monthly payment of more than $3,800, compared with about $3,095 with rates at 6.3%.

A US default threatens to “send the market into a deep freeze,” according to Jeff Tucker, a senior economist at Zillow.

As the Fed tightens monetary policy to fight inflation, mortgage rates have been above 6% for months. That’s cooled the pandemic real estate frenzy, with the higher borrowing costs keeping both buyers and sellers on the sidelines. First-time buyers have had a particularly hard time cracking the market and another surge in rates would only make it worse, Tucker said.

President Joe Biden and House Speaker Kevin McCarthy so far have failed to reach a deal on raising the ceiling and the US could default on its debt as soon as June 1, according to Treasury Secretary Janet Yellen.

This article was provided by Bloomberg News.