Waiting for Mortgage Rates to Drop? Here's Why That's Risky for Washington Homebuyers

If you live in Washington and have been sitting on the sidelines waiting for mortgage rates to plunge back to the 3 % range we saw a few years ago, you’re not alone. But waiting because “rates are sure to drop soon” might mean missing out on opportunities – and it could cost you more in the long run. Here’s what’s really going on.

What’s in the One Big Beautiful Bill Act (and why you should care)

The One Big Beautiful Bill Act (OBBBA), signed on July 4 this year, is mostly a tax bill. It makes some homeowner‑friendly provisions permanent, such as:

• Deducting mortgage insurance forever. Premiums on FHA, VA, or private mortgage insurance can now always be deducted(subject to income limits)(source) 

• Keeping the mortgage‑interest deduction stable. The law locks in the $750,000 cap on how much mortgage debt qualifies for an interest deduction(source) No expansion, but also no shrinkage.

• Raising the SALT cap (temporarily). From 2025–2029, the cap on state and local tax deductions rises from $10,000 to $40,000(source) which could help Washington homeowners who pay high property taxes.

• More affordable rentals. It expands the Low‑Income Housing Tax Credit program, which should add more affordable apartments(source)

These incentives reduce the after‑tax cost of owning a home, especially for higher‑priced properties. They don’t, however, change the actual interest rate you’ll pay-Mortgage rates are determined by broader economic forces.

Why rates may not fall like you expect

1. Big deficits = higher long‑term rates. The OBBBA is expensive. Non‑partisan estimates suggest it will increase federal deficits by about $3.4 trillion over the next decade(source). Someone has to buy all those new Treasury bonds, and investors demand higher yields when they expect more borrowing. The Yale Budget Lab modeled this and found that, because of the bigger deficit, 30‑year mortgage rates could be roughly 0.4 percentage points higher by 2030 than if the bill hadn’t passed(source). In other words, the law nudges rates up, not down.

2. Forecasts show rates in the mid‑6 % range for a while. Major forecasters don’t see rates plummeting. Fannie Mae’s July 2025 outlook predicts 6.4 % by the end of 2025 and 6.0 % by the end of 2026(source). Earlier this year they projected 6.3 % and 6.2 %, so expectations have only ticked downward slightly(source). The Mortgage Bankers Association expects 6.7 % in 2025, easing to 6.4 % in 2026 and 6.3 % in 2027(source). That’s still higher than the sub‑5 % rates many are hoping for.

3. The Fed isn’t a magic wand. Even when the Federal Reserve cuts its benchmark rate, mortgage rates don’t always follow. Last year the Fed cut rates by a full percentage point, yet average 30‑year mortgage rates rose by about 1¼ percentage points(source) Mortgage rates depend on inflation expectations, investor demand for mortgage‑backed securities and the spread between Treasury yields and mortgage bonds.

A simple example: what does 0.5 % really mean?

Consider a $500,000 home in Washington with 20 % down ($400,000 mortgage). At 6.5 %, your monthly principal and interest is about $2,528. If rates fall half a percentage point to 6.0 %, the payment drops to $2,398—a savings of $130 a month. Nice, but not life‑changing. Now imagine home prices rise 5 % next year because buyers flood back into the market. Your $500,000 home costs $525,000, making the new loan $420,000. Even at 6.0 %, the payment is $2,518—almost the same as if you bought at today’s price and rate. Waiting can cancel out any rate savings.

Why buying now might make sense

• You can always refinance. If rates do drop in the future, you can refinance. There’s no guarantee they will fall significantly, and you can’t go back in time to lock in today’s home price.

• Tax perks are stable. With mortgage‑insurance premiums and interest deductions locked in(source)(source), you know the tax rules. That reduces uncertainty.

• More housing supply is coming. The expanded Low‑Income Housing Tax Credit may help ease rent and entry‑level home pressures over time(source), but it will take years to build enough units.

• Washington’s housing market is resilient. Marysville, Seattle, Spokane and other areas still face low inventory and steady demand. If prices rise while you wait, any modest rate decline may not save you money.

The bottom line

Predicting interest rates is like forecasting Washington weather—sometimes you get rain on the day you planned a picnic. Credible forecasters currently expect mortgage rates to stay around 6 %–6½ % for the next couple of years(source)(source). Meanwhile, the One Big Beautiful Bill Act adds upward pressure on rates over the long haul(source). If you find a home you love and can afford the payment comfortably, waiting for a dramatic rate drop may be a gamble you don’t need to take.

Sources: Yale Budget Lab, Fannie Mae Economic & Housing Outlook, Mortgage Bankers Association, National Mortgage Professional