In welcome news for prospective homebuyers, the 30-year fixed-rate mortgage is expected to fall to 6.3% by the end of the year and reach 6.2% by the end of 2026, according to Fannie Mae’s latest economic developments report.
The most recent Fannie Mae predictions represent a downward revision by 0.3% from the government-sponsored enterprise’s projections released last month. The average 30-year fixed-rate mortgage declined 0.02% this week to 6.65%, according to Freddie Mac.
Fannie Mae sees the decline in mortgage rates spurring increased home sales. It revised its 2025 total home sales outlook to 4.95 million units from 4.90 million.
“We expect the recent pullback in mortgage rates will provide a small boost to home sales this year,” Mark Palim, Fannie Mae’s chief economist, said in a press release. “While our latest forecast calls for a period of modestly slower economic growth, historically, interest rates have been the most important driver of home sales.”
On the construction side, Fannie left its outlooks for single-family and multifamily construction largely unchanged.
“Regarding new home sales and construction, there is additional risk to starts stemming from upward pricing pressures related to tariffs on lumber and other materials,” the report stated. “However, lower mortgage rates would also give homebuilders some additional support by not having to offer as steep concessions and rate incentives to drive sales, and the net effect may be to keep homebuilders’ margins steady.”
After the Federal Reserve held its highly anticipated monetary policy meeting earlier this month, many industry observers predicted two eventual Fed rate cuts this year. But Fannie Mae sees only one rate cut occurring in September, followed by two additional cuts in 2026.
“While the growth outlook has softened, we expect the upward pressure on price measures from tariff dynamics may lead to the Federal Reserve taking a wait-and-see approach as it seeks to balance its dual mandate for full employment and price stability,” the Fannie Mae report stated.
