Small businesses and homebuyers face loan hikes from new policy
The mortgage industry faces rising headwinds following the release of new analyses projecting higher borrowing costs tied to the House-passed Republican budget bill. The legislation, endorsed by President Donald Trump and dubbed the “One Big Beautiful Bill,” could add $2.42 trillion to the US deficit over the next decade, according to the nonpartisan Congressional Budget Office (CBO).
The increase in federal borrowing is likely to pressure interest rates upward, which would translate to higher mortgage rates and loan costs for families and small businesses. Research from the Center for American Progress (CAP), using CBO assumptions and modeling from Yale’s Budget Lab, estimates that the resulting fiscal impact could cost new homeowners an average of $600 more annually in mortgage interest by 2030—amounting to approximately $18,000 over the lifetime of a 30-year loan.
The bill includes permanent extensions of the 2017 Tax Cuts and Jobs Act provisions and offers new tax benefits, such as the elimination of taxes on tips and overtime pay through 2028. While proponents argue that economic growth spurred by deregulation, tax relief, and tariffs will offset revenue losses, the CBO has not incorporated dynamic economic effects in its scoring.
“The higher debt from this proposed budget bill would increase borrowing costs for families and businesses throughout the economy,” CAP wrote, noting that increased deficits typically lead to higher long-term interest rates as the Federal Reserve raises rates to contain inflation.
Small firms brace for higher interest rates
State-level analysis from CAP shows how the financial burden would vary. In Pennsylvania, a family purchasing a home five years from now could face an additional $17,700 in mortgage interest over a 30-year term. In California, that figure climbs to $27,900. Small-business owners are also projected to experience increases of up to $1,500 annually in loan interest, depending on the state and loan type.
The House bill has passed narrowly and now faces an uncertain path in the Senate, where some lawmakers have expressed concern over its fiscal implications and deep cuts to social programs. The CBO also noted that provisions in the bill could leave over 10 million people without health insurance by 2034.
The broader fiscal strategy has drawn criticism from fiscal conservatives and business leaders alike, including Trump ally Elon Musk, who called the bill a “disgusting abomination.” Treasury secretary Scott Bessent, however, defended the bill’s economic assumptions, citing projections of GDP growth exceeding 3% by next year.
While debate continues in Washington, the outlook for mortgage borrowers has already grown more uncertain. If enacted, the bill could usher in a new era of higher financing costs, complicating the path to homeownership for many Americans.
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