Fannie Mae Raises Mortgage-Rate Forecast Sharply for 2027

Fannie Mae released a sharply higher mortgage-rate forecast through 2027, signaling a tougher housing market, with potential consequences for commercial real estate that extend beyond home sales.

The GSE said developers and lenders face weaker demand for new homes. Retailers could feel the effects if higher borrowing costs and economic uncertainty push consumers to pull back, GlobeSt. reported.

Fannie Mae’s revised forecast puts the 30-year fixed mortgage rate at 7.4% in the fourth quarter of 2026 and 7.5% throughout 2027. That is a substantial increase from Fannie Mae’s previous projections of 6.8% for the fourth quarter and 6.7% throughout next year.

The shift comes as housing demand is already weakening, according to GlobeSt. It said signed contracts for pending home sales were down 8.5% year-over-year, citing Zillow data.

Fannie Mae Raises the Stakes

Mortgage rates have risen sharply from their early-year lows. The 30-year fixed rate stood at 7.33% on Oct. 15, up from 5.98% on Feb. 26, according to Freddie Mac data available through the Federal Reserve Bank of St. Louis.

Fannie Mae’s forecast suggests little relief ahead, GlobeSt. said. Mortgage rates are expected to remain above their projected fourth-quarter level.

For developers and lenders, GlobeSt said that outlook adds to concerns about buyer demand. Consumers facing higher financing costs may become less willing or able to buy a home, which adds additional pressure to new housing projects.

The potential impact also reaches retail properties, GlobeSt. noted. If concern about borrowing costs and the economy prompts households to curb spending, retailers could face pressure alongside the housing industry, GlobeSt said.

Treasury Yields Complicate the Outlook

The mortgage-rate outlook is closely tied to long-term Treasury yields, particularly the 10-year, GlobeSt said. Its maturity roughly aligns with the average mortgage duration, making it a key benchmark for mortgage pricing.

Rising Treasury yields have helped push borrowing costs higher, GlobeSt. noted.

Pimco Chief Investment Officer Dan Ivascyn recently said a 6% reading on the 10-year Treasury was possible, though not certain.

The latest bond-market moves show why that trajectory is far from settled, GlobeSt noted. It said the 10-year yield fell from a recent closing high of 5.31% to 5.07% at 5 p.m. Oct. 15. The 20-year yield also declined, dropping from 5.71% on Oct. 7 to 5.46% on Oct. 15.

GlobeSt. noted those declines counter Fannie Mae’s higher forecast amid a tech sell-off, but they do not show that borrowing costs are headed for a sustained retreat.