Fannie Mae raises 2027 mortgage rate forecast to 7.5%

Economists at Fannie Mae have significantly revised their outlook for U.S. mortgage rates, predicting higher borrowing costs through the end of 2026 and into 2027. The agency now forecasts the average rate on the 30-year fixed mortgage at 7.4% for the fourth quarter of this year and 7.5% for all of 2027. This represents a sharp increase from its previous forecast of 6.8% for the fourth quarter and 6.7% for 2027.

Current Market Conditions

As of Tuesday, the average rate on the 30-year fixed mortgage stood at 7.46%, according to Mortgage News Daily. Rates are expected to move higher following a hotter-than-expected inflation report. Mortgage rates have been rising sharply since the start of September, driven by stubbornly high inflation and sell-offs in bond markets.

The Federal Reserve recently raised its benchmark rate for the first time in more than three years. While mortgage rates do not follow the Fed’s rate exactly, they react to how the central bank sees inflation going forward. Additionally, mortgage rates loosely follow the yield on the 10-year Treasury, which has been rising due to higher oil prices and growing concerns in the global economy.

Impact on Housing Demand

Higher rates have already slowed the housing market this fall. Pending sales, counted by signed contracts on existing homes, were down 8.5% in September year-over-year, according to Zillow. Mortgage demand continues to drop sharply as buyers face higher prices and weakening affordability. The report notes that fewer buyers can now afford a home, and fewer can qualify for a mortgage.

Fannie Mae did not respond to requests for comment on its latest forecast.

Why it matters

The revised forecast signals a prolonged period of high borrowing costs for homebuyers. With rates projected to remain above 7% through 2027, affordability challenges are likely to persist, potentially keeping transaction volumes low and limiting access to homeownership for many Americans.

---

Sources

• cnbc.com: Fannie Mae sharply raises mortgage rate forecast for 2027
• tradersunion.com: Fannie Mae raises mortgage rate forecast as housing pressure builds
• news.ssbcrack.com: Fannie Mae Predicts Rising Mortgage Rates Through 2027 as Housing Market Cools - SSBCrack News

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.