WASHINGTON—Fannie Mae economists have sharply increased their forecasts for mortgage rates through the end of 2026 and all of 2027, predicting the average 30-year fixed mortgage rate will remain at or above 7.4% as persistent inflation, rising bond yields and higher interest rates continue to pressure the housing market.
According to CNBC, Fannie Mae’s Economic and Strategic Research Group now forecasts the average 30-year fixed mortgage rate will reach 7.4% in the fourth quarter of 2026 and average 7.5% throughout 2027.
That represents a significant upward revision from the group’s previous projections of 6.8% for the final quarter of this year and 6.7% for 2027.
The revised outlook, included in Fannie Mae’s October economic forecast dated Oct. 12, suggests prospective homebuyers and homeowners considering refinancing could face elevated borrowing costs well into next year.
Mortgage Rates Already Near Forecast Levels
According to CNBC, the average rate on a 30-year fixed mortgage stood at 7.46% Tuesday, based on data from Mortgage News Daily.
Rates were expected to move even higher Wednesday following a hotter-than-expected inflation report that pushed bond yields upward.
Mortgage rates have risen sharply since the beginning of September, reflecting stubborn inflation, rising oil prices and broader concerns about the global economy.
The Federal Reserve also recently raised its benchmark interest rate for the first time in more than three years.
Although mortgage rates do not directly track the Fed’s benchmark rate, they are influenced by bond market expectations about inflation, monetary policy and the direction of the economy.
Mortgage rates generally follow movements in the yield on the 10-year U.S. Treasury note, which has climbed significantly amid the recent bond market sell-off.
Higher Rates Expected Through 2027
Fannie Mae’s latest economic projections also anticipate that Treasury yields and short-term interest rates will remain elevated.
According to the forecast:
- 30-year fixed mortgage rate: 7.4% in the fourth quarter of 2026 and an average of 7.5% in 2027.
- 10-year Treasury yield: 5.3% in the fourth quarter of 2026 and throughout 2027.
- Federal funds rate: 4.0% in the fourth quarter of 2026, averaging 4.4% during 2027.
Fannie Mae said its interest rate projections were based on market rates as of Sept. 30.
Implications for Housing Market
The higher mortgage rate outlook presents additional challenges for a housing market already struggling with affordability pressures.
Higher borrowing costs reduce purchasing power for prospective buyers and increase monthly payments, particularly for first-time buyers with limited down payments.
Elevated rates also can discourage existing homeowners with lower-rate mortgages from selling their properties, potentially limiting the supply of homes available for purchase.
For mortgage lenders, including credit unions, a prolonged period of rates above 7% could continue to weigh on purchase mortgage demand and refinancing activity.
The revised forecast also indicates that Fannie Mae economists see little near-term relief from the interest rate pressures that have affected the housing market since September.
