Fannie Mae lifts 2027 mortgage rate outlook to 7.5%

Fannie Mae's economists have raised their outlook for mortgage rates through the end of 2026 and into 2027. The agency now expects the average 30-year fixed rate to reach 7.4% in the fourth quarter of this year and 7.5% for the following year, compared with earlier forecasts of 6.8% and 6.7% respectively.

The current average rate on a 30-year fixed loan was 7.46% on Tuesday, according to Mortgage News Daily, and analysts anticipate further increases as bond yields climb following a hotter-than-expected inflation report.

Mortgage rates have been climbing sharply since early September, driven by persistent inflation and a sell-off in bond markets. The Federal Reserve also raised its benchmark rate for the first time in more than three years, influencing mortgage rates indirectly through expectations about future inflation.

Higher rates are already dampening the housing market, with pending home sales falling 8.5% in September year-over-year, according to Zillow. Mortgage demand is declining as higher borrowing costs reduce affordability and limit the number of buyers who qualify for loans.

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