In fiscal year 2025, the United States paid $970.4 billion in interest on its debt. That is more than the $916.6 billion it spent on national defense. The debt behind that bill stood at $40.3 trillion on October 8, 2026.
Most people file that number under politics. But part of that bill reaches a place you would never think to look: your mortgage rate. It is smaller than the headlines say. And stranger.
The math, run forward:
The Treasury almost never pays off a bond that comes due. It sells a new one to replace it, at whatever the market charges that day. The average rate on its marketable debt was 1.47% on September 30, 2021. It was 3.518% on September 30, 2026. About 22.4% of that debt is in bills that mature within a year, so that part reprices almost at once.
Net interest was $223.3 billion in fiscal 2015, $352.3 billion in 2021 and $970.4 billion in 2025. In the first eleven months of fiscal 2026 it reached $1.017 trillion. By our math, about 70% of the jump came from the rate and the rest from the size of the debt.
The average 30-year mortgage rate was 2.65% on January 7, 2021, the lowest in Freddie Mac's survey. On October 8, 2026 it was 7.40%. On a $400,000 loan, the payment went from $1,611.86 a month to $2,769.52. Same house, same loan, 1.72 times the payment.
Underneath it, the ten-year Treasury yield was 5.22%, its highest close since June 2007. Of the 1.54-point rise in the ten-year yield in the Fed's model since September 16, 2024, 1.03 points are the term premium: the extra yield a lender demands for waiting. Two thirds.
Here is where the popular story breaks. A Federal Reserve Board staff study published in May 2026 finds that each extra point of debt against the size of the economy adds about 2 to 3 basis points to the term premium. Debt held by the public has risen 2.73 points of G.D.P. since late 2024. Multiply it out: 5 to 8 basis points, out of a rise of 103. The rest, in the same data, is inflation (prices rose 3.40% in the year to August 2026) and the Fed.
It runs through one channel. Credit cards are priced off the prime rate, which is the Fed's rate plus 3 points. Car loans sit closer to two-year and five-year rates. The mortgage is the one that follows the ten-year.
Why it still matters: the arrow also runs the other way. The Congressional Budget Office published two scenarios on October 8, 2026. If every rate stays 150 basis points above its baseline, deficits grow by $6.0 trillion over ten years, and $4.9 trillion of that is extra interest. Higher rates raise the bill, a bigger bill means more borrowing, and all of it is sold into the same market your mortgage is priced from.
One country walked it back. Canada's federal debt peaked at 66.8% of its economy in the 1995 to 96 fiscal year and was down to 28.3% thirteen years later. Interest went from 37.6 cents of every dollar collected to 5.9 cents. It has since crept back up to 10.5 cents. The United States ran a surplus of 2.3% of G.D.P. in 2000, and debt held by the public was 30.9% of the economy by mid-2001. Neither came free. Both rode years of strong growth.
The two numbers a household does control:
The rate the national debt has nothing to do with. Credit card accounts that charge interest averaged 22.36% in August 2026. A one-year Treasury bill paid 4.44%. On a $5,300 balance, a year of card interest is about $1,185. The same money at the bill rate earns about $235, before compounding.
Time. A rate lock freezes your mortgage rate between the offer and the closing, usually for 30, 45 or 60 days. It protects you until closing, not for thirty years.
And the premium, in dollars. This is our own illustration, not a forecast. A $400,000 thirty-year loan at 7.40% costs $2,769.52 a month. Take out only the 1.03 points the term premium added since September 2024 and everything else stays the same: $2,494.17. A gap of $275.35 every month. Measured directly, the Fed study's effect from two years of new debt works out to about $21.80 a month.
You and the Treasury borrow off the same ten-year rate. When it rises, the government's bill grows by trillions. Yours grows by hundreds. The government can roll its debt forever and try again at a better price. You get one rate, and you keep it for thirty years.
No advice here. No tips, no recommendations. Just the numbers, and where each one is published. The full source list is in the video description.
— The Cost of Living
Book mentioned in this channel: The Psychology of Money, by Morgan Housel — https://amzn.to/47KvNx3
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