Mortgage Interest rates & Buying a home in Washington

How interest rates affect buying a home in Washington state.

12/8/20232 min read

Researching interest rates while searching for homes in Washington.
Researching interest rates while searching for homes in Washington.

How Interest Rates Affect Buying a House in Washington

As of October 10, 2023, the average interest rate for a 30-year fixed mortgage was 7.62%, and 7.12% for a 30-year fixed VA home loan, according to Mortgage News Daily. In 2020 rates were historically low, freeing up extra cash for buyers to purchase the home of their dreams. As you can see, these low rates are no longer available, due to inflation and other economic factors. Many are predicting that when rates come back down, we’re going to see another hot housing market with even higher home prices, because we haven’t solved the problem of low inventory.

Higher interest rates have also caused many to hold off on plans to sell simply because they are "rate locked", not wanting to lose their historically low interest rate if they were to buy another home. This has contributed to a lack of homes for sale in Washington, with only 11,617 condos and houses for sale in August 2023, considerably lower than the previous year. For comparison, there were 31,619 homes for sale in Washington in Aug. 2013. The principles of supply and demand play out here; less homes for sale usually means higher prices. However, in some cases there can be opportunity to get a great deal on a home with less buyers to compete with.

Is the Fed finished raising interest rates in 2023?

Today's mortgage rate increases are bringing the average lender closer to 7.5% on a fixed 30-year loan. This is the highest interest rates have been since late 2000. Lower rates are still available for certain scenarios and discount points, but many scenarios are also seeing higher rates. Bond traders seem to be looking at significantly weaker levels (i.e. higher yields/rates) for no new apparent reasons. Reasons for the rising rate momentum have been ongoing; Decades-high inflation requires higher rates to fix. The anticipation was that these higher rates would potentially damage the economy more than they have. It seems that until the damage shows up, the fed will continue playing a balance game with raising interest rates to curb inflation.

Is it a good idea to lock in a mortgage rate?

Some investors are anticipating rate cuts as soon as early next year. The hope is that mortgage rates will lower back down once inflation is back under control, but there are never any guarantees when predicting mortgage rates and trying to time the market. However, one guarantee is the sooner you lock in a mortgage, the sooner your home equity clock starts ticking. If you’re ready to become a homeowner, reach out to a lending professional to see what rate and loan type you can qualify for. If you need a trusted lender, I would be happy to help with a referral!