In a striking shift, Fannie Mae is now predicting 30-year fixed mortgage rates will average 6.8% in the fourth quarter and remain at that level through the first half of 2027.
The revision represents a sharp increase from the forecast issued just a month earlier. Fannie Mae’s July outlook called for 30-year fixed rates to average 6.4% through the rest of 2026 and 6.3% through the first three quarters of 2027. It even forecast rates would fall to 6.2% by the fourth quarter of 2027.
Fannie Mae now predicts 30-year fixed rates will average 6.7% in the second half of 2027.
The January 2026 forecast had initially forecast rates to average around 6% throughout 2026 and 2027. However, that came before the U.S. and Israel attacked Iran, triggering global energy and trade shocks.
Rick Sharga, CEO of the mortgage advisory firm CJ Patrick Co., told Scotsman Guide there are multiple factors that likely prompted Fannie Mae’s Economic and Strategic Research Group to raise its estimates.
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“The only real surprise is that they didn’t revise their forecast sooner,” he said.
Sharga first pointed to rising oil prices as a factor. As markets have grown more concerned about the long-term inflationary impact of oil and gas costs, bond yields have risen, taking mortgage rates with them.
“Beyond that, the national debt just surpassed $40 trillion for the first time and continues to rise,” Sharga added. “That’s likely to also keep bond yields inflated, which will make it difficult for mortgage rates to come down meaningfully.”
Finally, he said the Federal Reserve, faced with weakening employment and wage data and inflation remaining higher than it would prefer, is “caught between the proverbial rock and hard place, with little they can do to bring borrowing costs down in a way that would help reduce mortgage interest rates.”
None of this was apparent when economists were developing their 2026 forecasts, Sharga concluded, “but all of these things now weigh heavily against much of an improvement in borrowing costs in the next 12 to 18 months.”
