Social Security's Trust Fund Crisis Could Send Mortgage Rates Toward 9%

The looming Social Security trust fund depletion might affect everyday borrowing costs, not just your retirement plan. New research found that if the trust fund becomes insolvent and additional federal borrowing is used to cover the shortfall, mortgage rates could climb, too.

Whether you're concerned about your retirement benefits or are considering buying a house in the next decade, here's what you should know about this important issue.

The Social Security insolvency date

The Social Security and Medicare Board of Trustees' 2026 report found that the Old-Age and Survivors Insurance (OASI) trust fund may run dry by the fourth quarter of 2032. That's one quarter earlier than the Trustees projected in 2025. Once the fund is depleted, the Social Security program's income from payroll taxes would only be able to cover 78% of the total scheduled benefits, resulting in a blanket benefits reduction unless Congress implements a solution.

The mortgage rate connection

On June 26, George Mason University's Mercatus Center published research findings indicating a potential connection between the trust fund's depletion and mortgage rates. According to the report, if Congress pushes implementing reform closer to the projected trust fund depletion date, it could increase the chance that Congress might rely on additional borrowing to keep the Social Security program solvent and avoid a benefits cut. That additional borrowing could potentially strain Treasury markets and impact the broader economy, even resulting in a fiscal crisis.

How mortgage rates might be impacted

If Congress relies on large-scale borrowing to support Social Security, borrowing costs throughout the economy might increase, driven higher by the country's rising deficits that drive up bond yields. It's possible that interest rates might rise faster than the economy grows, meaning consumers might pay more when they need to borrow money to buy a home or car. Credit card interest rates might also increase. 

According to a 2025 report by the Committee for a Responsible Federal Budget, the 10-year Treasury yield might climb from approximately 4% to 6.6%. Such an increase might cause the interest rate on a 30-year fixed-rate mortgage to climb from 6.3% to 9%.

How borrowing might affect inflation and the bond market

Large-scale borrowing to fund Social Security might have other significant financial impacts. Investors might start to worry that the government might not ultimately be able to cover its debt, which could cause domestic price levels and inflation to increase.

If the Social Security insolvency date approaches and Congress hasn't taken action to solve the problem, the bond market might start repricing risk, since investors don't want to wait for a crisis before they start adjusting their strategy.

A warning call

Researchers have produced these projections and modeled scenarios; they're not based on enacted policy or any sort of certainty. But they do act as a warning call about what might happen if Congress doesn't implement a solution or ultimately implements large-scale borrowing in response to the trust fund's insolvency.

Legislators still have time to identify and implement reform solutions that don't incorporate borrowing money to fund the program, so nothing is certain at this time. However, if Congress borrows large amounts of money, these projections indicate that it might have a significant impact on the economy and on anyone who borrows money.

Congress could adjust the benefits cap

Congress has many options other than relying on large-scale borrowing to support the Social Security program.

Legislators might choose to cap Social Security benefits at $100,000 per couple, extending the trust fund's solvency while still supporting Americans who paid into the program. Congress could also modify the cost-of-living adjustment (COLA), an annual calculation performed to ensure that benefits keep up with inflation. Modifying the cap might slow the benefits growth, saving the program money.

Congress could change the retirement age and payroll taxes

Increasing the full retirement age at which Americans may claim full Social Security benefits might also save the program money. Since life expectancy has increased since the program's creation, larger portions of the population are living longer and collecting benefits for more time. Increasing the retirement age from age 67 to 70 could save the program about $100 billion over 10 years, according to the Economic Policy Innovation Center.

Legislators have also proposed raising the Social Security payroll tax cap. Under current law, only the first $184,500 of an individual's annual earnings are taxed for the Social Security program, meaning large portions of high earners' incomes go untaxed. Raising or eliminating that cap might generate additional income for the program.

Bottom line

If Congress relies on large-scale borrowing and drives up mortgage rates, those higher interest rates might raise borrowing costs for anyone who takes out a home loan in the 2030s. Such a situation might make homeownership even more challenging for Americans, plus it might put significant financial strain on anyone with a variable interest rate loan.

The discussion about Social Security's trust fund depletion is no longer just about how retirees might have to navigate with reduced benefits, but also about how it might affect the greater U.S. economy. This is a pressing topic, and legislators are talking about it, so be sure to follow the news for updates on how it might impact your loan costs and your retirement plan.