U.S. mortgage rates may remain high until 2027! Fannie Mae significantly raises forecast, 30-year mortgage rate expected to reach 7.5% next year

According to Jinse Finance APP, the high interest rate pressure in the U.S. real estate market may last even longer. Fannie Mae, the U.S. housing mortgage finance agency, has just made a significant upward revision to its mortgage rate forecast for the fourth quarter of 2026 and the whole year of 2027. It now expects the average rate for 30-year fixed mortgages in the U.S. to reach 7.4% in the fourth quarter of this year and remain at 7.5% throughout 2027. Previously, Fannie Mae had forecasted rates of 6.8% and 6.7% for these periods, respectively.

This means Fannie Mae has raised its forecast for the fourth quarter’s mortgage rate by 0.6 percentage points and its 2027 full-year forecast by 0.8 percentage points. This adjustment reflects how persistent U.S. inflation, rising bond yields, and shifts in monetary policy outlook are significantly impacting expectations for future housing finance costs.

According to data from Mortgage News Daily, as of Tuesday, the average rate for 30-year fixed mortgages in the U.S. had already risen to 7.46%. With the latest inflation data coming in above market expectations and bond yields moving higher, mortgage rates could rise further on Wednesday.

In fact, since early September, U.S. mortgage rates have been climbing sharply. Stubborn inflation pressures, a bond market sell-off, and further monetary tightening by the Federal Reserve have together driven up housing borrowing costs rapidly.

Previously, the Federal Reserve implemented its first interest rate hike in more than three years. While mortgage rates do not move in perfect tandem with the Fed’s benchmark rate, market expectations regarding the Fed’s future views on inflation and policy direction still have a major impact on mortgage rates.

The U.S. 30-year fixed mortgage rate typically moves closely in line with the 10-year U.S. Treasury yield. Recently, boosted by rising oil prices and mounting concerns over the global economic outlook, the 10-year Treasury yield has kept rising, further increasing the cost of housing finance.

The impact of high interest rates has already started to appear in the U.S. real estate market, as the traditional fall home buying season is cooling off earlier than usual. Data from the real estate platform Zillow show that pending home sales in the U.S. fell by 8.5% year-on-year in September. This indicator mainly reflects signed contracts for the purchase of second-hand homes that have not yet closed and is viewed as an important leading indicator of future home sales activity.

Meanwhile, U.S. mortgage loan applications continue to drop sharply, showing that the dual pressures of high home prices and high interest rates are further weakening housing affordability for buyers. For potential homebuyers, rising mortgage rates mean not only higher monthly payments but could also directly impact their ability to get bank loan approval.

As borrowing costs rise, some families who could afford to buy a home may have to lower their budget or even postpone their purchase plans. Other buyers might lose their eligibility for a mortgage because their income-to-debt ratios no longer meet lenders' requirements. This means the impact of high interest rates on the U.S. real estate market is not limited to suppressing purchase demand but is also shrinking the pool of qualified potential buyers.

It is worth noting that Fannie Mae's significant upward adjustment to its rate forecast means that the earlier expected relief in financing costs for the U.S. housing market could be further delayed. If the 30-year fixed mortgage rate remains at about 7.5% throughout 2027, buyers will continue to face higher monthly payment pressure, and real estate transaction activity could remain subdued.

For the real estate market, persistently high mortgage rates could further widen the price gap between buyers and sellers. Buyers become more cautious due to higher financing costs, while sellers may be unwilling to significantly lower prices, resulting in longer transaction cycles and continued sluggish market activity.