Fannie Mae predicts that mortgage rates will barely budge for the next two years but some volatility is possible.

The government-sponsored enterprise slightly revised up its forecast and now believes rates will end this year at 6.6% and next year at 6.5%.

But “there are plausible scenarios for both upward and downward movement in mortgage rates due to trade policies,” Fannie’s Economic and Strategic Research (ESR) Group said in a report.

The group further predicted rate volatility as markets react to the new administration’s trade policy. 

Fannie Mae still believes that the economy will grow by 2.2% this year and it had a slightly rosier outlook on home sales due to a stronger-than-expected December and “resilient purchase applications” data. However, home sales are still expected to end the year down around 22% compared to the 2019 level.

Higher mortgage rates “would exacerbate the existing ‘lock-in effect’ and worsen affordability, which may then weigh on home sales and mortgage originations activity,” said Kim Betancourt, Fannie Mae’s vice president of Multifamily Economics and Strategic Research.

“Of course, if mortgage rates move lower, we’d likely see an improvement in affordability and a corresponding pickup in housing activity,” Betancourt said.