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Lawmakers have yet to come to an agreement on the debt ceiling. Democrats want to raise it, without any strings attached, and Republicans are calling for spending cuts. If Congress fails to raise the limit in the coming weeks, Treasury Secretary Janet Yellen claims, economic “calamity” would ensue.

So how would that so-called calamity play out in the U.S. housing market??In a report published on May 11, Zillow’s senior economist Jeff Tucker argues that mortgage rates could top 8% if the U.S. defaults on its debts—which could happen as early as June 1.

Zillow’s economist does acknowledge that a U.S. default is “unlikely.”

Nonetheless, if the U.S. defaults on its debts, Zillow says, mortgage rates could reach 8.4% by September, which would send mortgage payments up for new borrowers up over 20%. And that couldn’t come at a worse time. Mortgage rates jumped from 3% to 6% in 2022, following home prices that skyrocketed 41% during the Pandemic Housing Boom. The two, together, have deteriorated affordability, bringing it to levels not seen since the housing bubble. If mortgage rates were to jump to over 8%, Zillow says that would send the housing market back into a “deep freeze.”

Let’s take a look at the difference between monthly mortgage payments at 6% versus 8%. On a $600,000 home, after putting 20% down, the monthly payment at 6% would be roughly $2,878 (without taxes and insurance.) With the exact same circumstances but at 8%, the monthly payment would be $3,522. That’s a $644 monthly difference. That would price a lot of buyers out of the market, and keep those who have been sidelined since rates went up last year on the outskirts.

“When we forecast the evolution of the housing market over the next 18 months in the event of such a debt default, we estimate that existing home sales would fall as much as 23% relative to the no-default baseline forecast later this year, and that home values may be 5% lower at the end of 2024 than expected in the no-default scenario,” Zillow says.

According to Zillow, if mortgage rates top 8%, existing home sales would drop 23% from 4.3 million in April to 3.3 million in September.

“Any major disruption to the economy and debt markets will have major repercussions for the housing market, chilling sales and raising borrowing costs, just when the market was beginning to stabilize and recover from the major cooldown of late 2022,” Zillow says.