Fannie Mae has revised its mortgage rate predictions upward, now estimating the average rate on a 30-year fixed mortgage to be 7.4% for Q4 2026 and 7.5% for 2027, compared to previous forecasts of 6.8% and 6.7%, respectively.
As of Tuesday, the average rate was reported at 7.46%, with expectations of further increases due to rising bond yields following a stronger-than-anticipated inflation report. The Federal Reserve's recent rate hike, the first in over three years, along with persistent inflation and rising oil prices, has contributed to the increase in mortgage rates.
This surge has already led to a significant slowdown in the housing market, with pending sales down 8.5% year-over-year in September, according to Zillow. The combination of higher mortgage rates and declining affordability is causing a sharp drop in mortgage demand, as fewer buyers can afford homes or qualify for loans.
Fannie Mae has not provided additional comments regarding these changes in their forecast