WASHINGTON–Fannie Mae is forecasting a drop in mortgage rates and increased home sales through 2026
“The July Federal Reserve Board of Governors meeting began July 29, and CME FedWatch predicts a 98% chance that the Fed holds interest rates at their current level.” Fannie Made said in a statement. “However, the probability of a rate cut at the September board meeting jumps to 65%, which could improve investor sentiment and homebuyer confidence.”
According to Fannie Mae, the combination of a potential interest rate cut, the boost to financial markets, and rising housing inventory may push mortgage rates back to more palatable levels.
Fannie Mae recently revised its mortgage rate forecast, predicting rates will reach 6.4% by the end of 2025 and 6.0% by the end of 2026.
Activity Picks Up
In addition to lower mortgage rates, housing market activity is expected to pick up, especially if rates decline.
In its July 2025 Economic Developments release, Fannie Mae notes that, “Our total home sales outlook for 2025 was revised to 4.85 million, up from 4.82 million previously. Our 2026 home sales projection is 5.35 million, up from 5.25 million.”
Declining mortgage rates are the most direct way to breathe new life into a faltering housing market, especially since the June 2025 Home Purchase Sentiment Index found that consumer sentiment toward housing is down month-over-month and year-over-year.”
