US mortgage rates may remain elevated until 2027! Fannie Mae sharply raises forecast, projecting the 30-year mortgage rate to reach 7.5% next year.

The high interest rate pressure on the US housing market may persist for a longer period. Fannie Mae, the US housing mortgage financing institution, has sharply raised its mortgage rate forecasts for the fourth quarter of 2026 and all of 2027, projecting that the average rate on a 30-year fixed mortgage in the US will reach 7.4% in the fourth quarter of this year and remain at 7.5% throughout 2027. Previously, Fannie Mae had forecast 6.8% and 6.7% for those two periods, respectively. This means Fannie Mae has raised its mortgage rate forecast for the fourth quarter of this year by 0.6 percentage points and its forecast for all of 2027 by 0.8 percentage points, reflecting how persistently high US inflation, rising bond yields, and changing monetary policy expectations are significantly altering the market's outlook for future housing financing costs. According to Mortgage News Daily, as of Tuesday, the average rate on a 30-year fixed mortgage in the US had risen to 7.46%. With the latest inflation data coming in above market expectations, bond yields have moved further higher, and mortgage rates may continue to climb on Wednesday. In fact, US mortgage rates have been rising sharply since early September. Stubborn inflationary pressure, a selloff in the bond market, and further tightening of monetary policy by the Federal Reserve have combined to push housing borrowing costs up rapidly. Previously, the Federal Reserve implemented its first rate hike in more than three years. Although mortgage rates do not move in perfect sync with the Fed's benchmark rate, market expectations for the Fed's future inflation assessment and policy path still have an important impact on mortgage rates. The average rate on a 30-year fixed mortgage in the US is usually closely tied to the trend in the 10-year US Treasury yield. Recently, driven by factors such as rising oil prices and growing concerns about the global economic outlook, the 10-year Treasury yield has continued to climb, further pushing up housing financing costs. The impact of high rates has already begun to show in the US housing market, with the traditional autumn homebuying season entering a pronounced cooling phase ahead of schedule. Data from real estate platform Zillow show that pending home sales in the US fell 8.5% year over year in September. This indicator mainly reflects existing-home transactions that have signed purchase contracts but have not yet closed, and is regarded as an important leading indicator of future housing sales activity. At the same time, US mortgage application demand has continued to fall sharply, indicating that the dual pressure of high home prices and high rates is further eroding buyers' housing affordability. For potential homebuyers, higher mortgage rates not only mean larger monthly payments, but may also directly affect whether they can obtain bank loan approval. As borrowing costs climb, some households that were previously able to buy homes may have to lower their budgets or even postpone their purchase plans. Other buyers may lose eligibility for mortgage applications because their income-to-debt ratio no longer meets lenders' requirements. This means the impact of high rates on the US housing market is not limited to dampening willingness to buy; it is also further shrinking the pool of potential buyers who qualify for loans. It is worth noting that Fannie Mae's sharp upward revision to its rate forecast means the decline in financing costs that the US housing market had previously hoped for may be further delayed. If the average rate on a 30-year fixed mortgage remains around 7.5% throughout 2027, homebuyers will continue to face high monthly payment pressure, and real estate transaction activity may also remain subdued. For the housing market, mortgage rates staying elevated for a long time may also intensify price disagreements between buyers and sellers. Buyers are becoming more cautious because of rising financing costs, while sellers may be unwilling to cut prices significantly, leading to longer home transaction cycles and persistently sluggish market volume.