What to Know About Mortgage Rates in Washington

Mortgage rates in Washington recently jumped to more than 7%, prompting some homebuyers to question if they need to get used to paying a lot in interest each month. 

But higher interest rates can trigger a drop in home prices—saving you money—while making it easier for homebuyers to find and successfully bid on their dream home.

Living in Washington state

Washington State is hard to beat for anyone looking for a combination of breathtaking natural sights and a cutting-edge technology hub. 

And while it may not have the lowest cost of living in the country, Washington residents don’t pay state income tax—potentially putting even more money into your homebuying bank account. 

Washington has a strong economy, with many large businesses calling the state home, and offers a moderate year-round climate. 

The state also boasts a vibrant arts scene, a diverse cultural environment, great food, and world-class sports and entertainment. 

The Washington housing market

Washington home prices rose 4.3% compared to 2021, while the total number of homes sold fell 23.6%. 

The average price for a home in The Evergreen State hovers just below $600,000, higher than the national average. 

The Washington real estate market experienced unprecedented growth last year with an increased demand for quality properties, making it even more competitive for first-time homebuyers or anyone looking for their dream home. 

As a result, most sellers received multiple offers—many tens of thousands above asking. 

While the momentum has built up and shows little sign of slowing, increasing interest rates are beginning to temper the red-hot market. 

But potential homebuyers still need to be ready to move when they find a home they like, making pre-approval an important first step.

Mortgage trends in Washington state

The last few years have been bullish for sellers, with an unprecedented surge in home sales. 

For example, 2020 saw 5.6 million homes sold, compared to 2021’s whopping 6.1 million housing transactions. 

According to the Mortgage Banker’s Association, adjustable-rate mortgages (ARM) accounted for almost 10% of all home loans nationwide—the highest since 2008. 

ARMs’ lower interest rates—lower than most other mortgage products—can offer those looking to buy a home or refinance their current mortgage payments a way to lock in low rates despite market fluctuations. 

Currently, the average 30-year, fixed-rate mortgage (FRM) is sitting at  mid-high 6’s, whereas the average interest rate for an ARM is low-mid 5’s—a difference that can add up to tens of thousands of dollars in under two years.

First-time home buyer programs in Washington

First-time homebuyers hoping to succeed in competitive real estate markets like Washington can take advantage of several programs designed to help those new to the market realize the dream of homeownership. 

Washington State Housing Finance Commission seminars

Washington State Housing Finance Commission runs a series of five-hour home buyer education seminars aimed at helping educate first-time homebuyers on the ins and outs of the home buying process. 

Graduates of these free seminars are eligible to participate in other programs, such as the Energy Spark Home loan and down payment assistance programs. 

Energy Spark Home Loan

If you’re interested in buying a home with improved energy efficiency, the Energy Spark Home Loan program can help save on mortgage costs.

Eligible homeowners with good credit can save up to 25% on their mortgage interest rate if their home exceeds the state’s energy standards. Both new builds and older, upgraded, or remodeled homes are eligible. 

Downpayment assistance programs

Washington also offers several downpayment assistance (DPA) programs* to help first-time homebuyers. Washington DPAs are typically low-interest loans aimed at lower-income households. 

Eligible borrowers can receive up to $10,000 for their down payment.

For borrowers in Washington, a mortgage calculator can be an excellent tool for estimating how much of a down payment you can afford—and whether a DPA would work for you.

Refinance to lower mortgage rates in Washington

Mortgage refinancing can help to better your financial situation in several ways. 

When you refinance your existing mortgage, you essentially swap your current home loan for a new loan with improved terms, such as a lower interest rate. 

Lower interest rates or longer terms typically help homeowners achieve smaller, more manageable monthly mortgage payments.**

Homeowners who refinance their current mortgage with one that has a lower interest rate usually end up paying fewer interest costs over the lifetime of the loan. 

Adjustable rate mortgages offer homeowners in Washington an opportunity to lock in a lower interest rate for the initial period, despite market fluctuations. 

Additionally, if you opt for a cash-out refinance, you’ll receive a lump sum cash payment for the difference in value between your existing mortgage amount and your new mortgage amount. This all depends on the equity you have in your home and the home’s current value.  

The cash you receive is not restricted, and homeowners can use it for any purpose they consider important. Common uses for cash-out refinance include home renovations, medical expenses, or family events such as weddings or vacations.

Will mortgage rates go down?

When the Federal Reserve hiked its benchmark interest rate this March, it began a trend that would see Washington mortgage rates caught between rising inflation and the Fed’s attempt to reign it in. 

The Fed raised the rate by 0.75 percentage points at each previous meeting. Two remaining policy decisions remain for this year, Nov. 2 and Dec. 14, causing many to ask whether more rises are on the horizon. 

The Fed is focused on controlling inflation, meaning Washington mortgage rates today could continue to swing upward for a few more months until inflation is under control. 

What are the experts saying about mortgage rates?

With 10-year Treasury Yields nearing 4%, mortgage rates increasing to 7% or 8% is no longer unthinkable, but should homeowners plan for that? 

Unfortunately, the jury appears to still be debating that issue.

According to Seattle Agent Magazine, rates could continue to rise, despite a “slower rate of home sales” that’s expected to continue into 2023.

The Mortgage Bankers Association and Fannie Mae predict mortgage rates will go down next year. 

Get started today with Homefinity

Whether you want to refinance your current mortgage to secure a lower mortgage rate or you’re a homebuyer concerned about the rising rates—Homefinity can help. 

Contact our experienced team today. We’ll help you get the best mortgage rates that we can in the Washington housing market.

*Eligibility subject to program stipulations, qualifying factors, applicable income and debt-to-income (DTI) restrictions, and property limits. 

**By refinancing your existing loan, your total finance charges may be higher over the life of the loan.

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