Fannie Mae sharply raises mortgage rate forecast for 2027

Key points

• Fannie Mae now forecasts the 30-year fixed mortgage rate at 7.4% in Q4 2026 and 7.5% in 2027.
• The previous forecast was 6.8% for Q4 2026 and 6.7% for 2027.
• Pending home sales fell 8.5% year-over-year in September, according to Zillow.

Fannie Mae economists have sharply raised their mortgage rate forecast for the end of 2026 and into 2027. The government-sponsored enterprise now expects the average 30-year fixed rate to reach 7.4% in the fourth quarter of this year and 7.5% throughout next year. Its earlier forecast was 6.8% for the fourth quarter and 6.7% for all of next year.

The average 30-year fixed rate was 7.46% on Tuesday, according to Mortgage News Daily, and was likely to move higher that day. Bond yields are rising after a hotter-than-expected inflation report.

Why rates are climbing

Mortgage rates have risen sharply since the start of September as inflation remains stubbornly high and bond markets sell off for several reasons. The Federal Reserve also raised its benchmark rate for the first time in more than three years. Mortgage rates do not track the Fed's rate exactly, but they respond to how the central bank views inflation ahead.

Mortgage rates loosely follow the yield on the 10-year Treasury, which has climbed sharply on higher oil prices and growing concerns in the global economy.

Housing market freeze

Higher rates have already put the housing market in an early deep freeze this fall. Pending sales, measured by signed contracts on existing homes, were down 8.5% in September compared with a year earlier, according to Zillow. Mortgage demand continues to fall sharply as buyers face higher prices and weakening affordability. 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.