Fannie Mae is now forecasting 7.5% mortgage rates through all of 2027

Fannie Mae has sharply revised upward its outlook for the average 30-year fixed mortgage rate, now expecting 7.4% in the fourth quarter of 2026 and 7.5% throughout 2027, compared with prior estimates of 6.8% for the fourth quarter and 6.7% for 2027, according to CNBC.

Fannie Mae's Economic and Strategic Research Group released its October economic forecast, dated Oct. 12. It projects the 10-year Treasury yield at 5.3% in the fourth quarter of 2026 and in each quarter of 2027. The federal funds rate is forecast at 4.0% in the fourth quarter and an average of 4.4% for 2027. The group said its interest rate forecasts are based on rates from Sept. 30.

The forecast also puts consumer price inflation at 3.7% in the fourth quarter of 2026 and 1.9% in the fourth quarter of 2027, measured year over year.

The average 30-year rate was 7.46% on Tuesday, with bond yields climbing in the wake of an inflation reading that exceeded expectations. According to CNBC, the Federal Reserve hiked its benchmark rate for the first time in over three years. CNBC noted that rates have been moving upward since early September, with the 10-year Treasury yield pushed higher by elevated oil prices and mounting unease about the global economic outlook.

According to CNBC, Fannie Mae left media inquiries about the forecast unanswered.

Mortgage rates have reached 7.50% for the week ending Oct. 9, a level unseen since November 2023. Home purchase applications fell for a sixth straight week, and refinance applications have dropped for eight straight weeks. Rates crossed above 7% for the first time since May 2024 in the week ended Sept. 18.

The rate increase has weighed on housing activity. Pending home sales fell 4% in September from August, the largest monthly drop in more than three years, and all 50 major U.S. metros tracked declined. Total supply of homes for sale rose to its highest level since March 2020.