Fannie Mae just raised its outlook, calling for much higher mortgage rates through late 2026 and into 2027. The team now projects the average 30-year fixed will be 7.4% in this year's fourth quarter and 7.5% for the entire next year. That is a notable shift from its earlier view of 6.8% for this year's fourth quarter and 6.7% for next year. The company did not return a request for comment on the update.
The 30-year fixed averaged 7.46% on Tuesday, according to Mortgage News Daily, and was likely to head higher that day as bond yields jumped after an inflation reading came in hotter than forecast. Since the start of September, borrowing costs have surged as price pressures prove stubborn and bonds sell off for several reasons. The Federal Reserve lifted its benchmark policy rate, the first hike in over three years. Mortgage pricing does not move in lockstep with the Fed, but it reacts to how the central bank views the inflation path.
Mortgage rate forecasts shape what buyers plan for over the next year. Market Briefs reads housing data free every weekday.
Home loan rates tend to track moves in the 10-year Treasury. That yield has climbed quickly on rising oil prices and mounting worries about the global economy. Elevated borrowing costs have already chilled the housing market early this fall.
Pending sales, which reflect signed contracts on existing homes, fell 8.5% in September from a year earlier, per Zillow. Applications for home loans are still tumbling as elevated prices and strained affordability take a toll. Fewer shoppers can swing today's payments, and fewer are able to qualify for a loan at all.
Higher-for-longer borrowing costs can reshape everything from move-up plans to renovation budgets. If rates stay elevated into next year, the market could remain thin on both buyers and sellers, with pricing power shifting neighborhood by neighborhood. Watching inflation data, Treasury yields, and Fed signals will tell you more about where monthly payments might head than any headline about a single day's rate move.
Rates staying high changes the whole affordability math. Join Market Briefs free and follow it.
