Mortgage Rates Forecast: Fannie Mae and MBA See 7%-Plus Into 2027

The short answer: probably not soon

Buyers waiting for mortgage rates to fall back toward 6% have been asking the same question all year. The most recent data and forecasts give a plain answer: relief probably won't come in 2026, and the main forecasters now say it won't come in 2027 either. In its October 22 weekly survey, Freddie Mac put the average 30-year fixed rate at 7.32%, down from 7.40% the week before. A year earlier the average was 6.19%.5 That small decline was the first weekly drop since late August. It followed seven straight weekly increases and one flat week.6

The climb was steep. The 30-year average was 6.65% on August 20 and reached 7.40% by October 8, a rise of three-quarters of a point in seven weeks.3 Measured from the late-February low of 5.98%, the increase adds about $355 a month to the payment on a $400,000 loan, according to figures attributed to the Associated Press.6

This article reads the latest rate data, forecasts, home sales and construction reports together. Taken as a whole, the evidence points to a market that has adjusted to rates above 7%, not one waiting for a quick turnaround.

The Fed held, but the Fed isn't what matters most

On October 28 the Federal Reserve kept its benchmark range at 3.75% to 4%. The vote was 10-2, and the decision followed a quarter-point hike in September.10 That hike was the Fed's first increase in more than three years.34 Markets are already looking past the pause. Ahead of the meeting, CME FedWatch priced roughly a 75% to 80% chance of another hike on December 9.6 Kalshi traders put a December hike at about 75%.3

Analysts across the coverage agree that mortgage rates follow the 10-year Treasury yield more closely than the federal funds rate. Bankrate's Jeff Ostrowski noted that mortgage rates rose by more than the Fed's quarter-point move in the month after the September hike.10 In early October the 10-year yield went above 5.30%, its highest since 2002 at the peak. Before the war with Iran began in late February, it was 3.97%.6 Realtor.com's Joel Berner described the pressure on bonds as a combination of inflation expectations, a broad bond selloff and growing deficits that require more debt issuance.4

The recent pullback did not come from better inflation news. September's consumer price index came in hotter than expected and pushed Mortgage News Daily's daily rate index to 7.56% on October 14. A selloff in artificial-intelligence stocks the next day sent investors into Treasuries and pulled the index down to 7.33%.6 A drop caused by a stock-market scare can reverse quickly, and buyers should not treat it as the start of a downtrend. September inflation was running at 3.7%.34 Oil was above $101 a barrel in late October.2 Neither figure supports a sustained decline in long-term yields.

The forecasts: higher for longer, with some disagreement

The biggest change this month was Fannie Mae's revised outlook. In its October housing forecast, Fannie Mae projected the 30-year rate at 7.4% in the fourth quarter of 2026 and 7.5% in every quarter of 2027. Its September forecast had those figures at 6.8% and 6.7%.34 That raises the 2027 outlook by 0.8 percentage points in one month.35 Fannie Mae's rate assumptions were also set as of September 30, before the hot October 14 inflation report. The forecast may therefore already understate the pressure.34

The Mortgage Bankers Association is slightly less pessimistic. Its October forecast has the 30-year rate at 7.3% at the end of 2026, 7.2% through the first three quarters of 2027 and 7.1% in the fourth quarter of 2027.31 Most of the gap comes from the 10-year Treasury yield each group assumes. MBA expects about 5.1% for the rest of 2026 and roughly 5% for most of 2027.31 Fannie Mae assumes 5.3% throughout.38 MBA chief economist Mike Fratantoni blamed both high inflation, which is pushing central banks to raise rates, and unsustainable deficits, which are pushing bond investors to demand higher long-term yields.35 He also raised the possibility of 9% mortgage rates. He called it a severe scenario rather than MBA's base case, one that would require Treasury yields of 6% to 7%.35

The main outlier is TD Cowen. Its researchers expected rates to fall to about 6.8% by the end of 2026 and 6.6% in 2027, but that forecast was published before the October inflation surprise.34 The coverage also contains a discrepancy readers should watch for. One trade publication reported that Fannie Mae expects a 7.5% average for all of 2026.32 Other reports describe the forecast as 7.4% for the fourth quarter only.3334 Given that rates were below 6% in February, the quarterly figures are the more reliable reading.

One point is clear: no major institutional forecast now shows rates falling below 7% before 2028. Lenders expect the same. TD Bank's Steve Kaminski said rates will likely stay elevated for at least another year.2

Home sales: stuck near 4 million

The housing market is still moving, but slowly. Existing-home sales rose 1.5% in September to a seasonally adjusted annual pace of 3.99 million. That was 2.2% lower than a year earlier.11 The monthly increase was helped by a downward revision to August, which now stands at 3.93 million.12 September was the second straight month below a 4 million pace.12

Signs of future sales are weaker. NAR's pending home sales index fell to a record low in September.30 One account put the monthly drop at 7.3%.24 Another, summarizing different reporting, put it at 4%.39 Zillow data showed pending contracts down 8.5% from a year earlier.37 The measures differ, but they all point the same way. Applications tell the same story. MBA's weekly survey showed purchase applications down for a seventh straight week.6 MBA's Joel Kan said the small easing in rates was not enough to bring buyers back.6

Fannie Mae now projects total home sales at about 4.713 million in 2027, down from its earlier forecast of 4.882 million.34 It also cut its 2027 forecast for refinance originations to about $430 billion, roughly half its previous estimate.32 Few homeowners have a reason to give up a lower rate.

Home prices: up nationally, but cracks are showing

The data most at odds with the slowdown is the price data. The national median existing-home price was $417,500 in September, up 1.3% from a year earlier and the 39th straight month of annual gains.11 NAR said it was the highest median on record for a September.12

The details show the gains are slowing. In the West, the median fell 0.3% from a year earlier to $613,600. The South gained only 0.2%.14 The Northeast led with a 4.7% gain.14 Inventory rose to 1.60 million homes, which equals 4.8 months of supply.11 Inman reported that inventory reached its highest level since November 2019.12 Zillow found that 27.4% of September listings had a price cut, up from 26.2% a year earlier.34

The price measures disagree. Realtor.com's Berner said cash buyers are seeing prices down 1.4% from a year earlier.4 NAR's closed-sale median is still rising. One likely explanation is that listing-based measures pick up price cuts before closed sales do. If so, the NAR median could turn negative within a few months. Fannie Mae expects its home price index to rise just 0.6% in 2027, down from 2.7% this year.35

Construction: builders are pulling back

Builders are adjusting faster than sellers. Housing starts fell 5.2% in September to an annual pace of 1.221 million. Economists had expected about 1.30 million.22 It was the third straight monthly decline.22 Single-family starts fell 4.6% to 859,000, their lowest in a year.29 Single-family permits, which point to future construction, dropped 4% to 845,000, the lowest since March 2023.30

One caution: the Census Bureau's 90% confidence interval for the September change was ±11.8 percentage points. That means the monthly decline alone is not statistically significant.24 The trend is still clear. Starts were down 7.4% from a year earlier.28 The National Association of Home Builders' confidence index fell to 29, its lowest since 2012.24 Multifamily permits rose 5.9% to 503,000, which suggests some apartment projects are still moving forward.29

Economists disagree about what the slowdown means. Santander's Stephen Stanley sees it as a needed correction that keeps unsold new homes from piling up.26 FWDBONDS' Christopher Rupkey asked who could afford new homes even if they were built.26 TD Economics expects homebuilding to stay subdued into the first half of 2027, citing financing costs, construction costs and labor shortages.22 Reuters reported that a construction worker shortage made worse by immigration enforcement and data-center building adds to the pressure.2630

What it means for buyers

Buyers who can act now have more leverage than at any point in years. NAR's Lawrence Yun said higher inventory and longer time on market strengthen buyers' negotiating position, and that sellers may need to offer discounts and incentives.20 Homes spent a median of 33 days on the market in September.14 First-time buyers made up 31% of sales.14

The trade-off is the monthly payment. NAR's affordability index fell to 105.4 from 106.7 a year earlier.12 Adjustable-rate loans offer some relief: MBA recently reported a 5/1 ARM contract rate of 6.54%, compared with 7.50% for a conforming 30-year fixed loan.34 That lower rate carries the risk of a higher payment after the fixed period ends.

On the evidence so far, waiting for 6% rates means waiting for inflation to cool, the 10-year yield to fall and fiscal pressures to ease, and none of those is in clear view. The more likely path is rates staying around 7% while prices flatten and, in some regions, decline. For buyers, the opening may come from lower prices more than lower rates.