Fannie Mae Raises Mortgage Rate Forecasts to 7.5%

Fannie Mae economists have significantly raised their mortgage rate forecasts, now predicting the average 30-year fixed rate will reach 7.4% in the fourth quarter of 2026 and hold at 7.5% throughout 2027. These figures represent a sharp increase from previous projections of 6.8% and 6.7% for those periods.

The upward trend follows a benchmark rate increase by the Federal Reserve System, the first such hike in over three years. Economists attribute the rising rates to a combination of the central bank's policy shift, rising bond yields, and stubbornly high inflation.

These financial conditions have already impacted the housing market. Zillow reported an 8.5% year-over-year drop in pending sales for September. Mortgage demand continues to decline as higher rates reduce overall affordability and limit the number of buyers who qualify for loans.