Fannie Mae made downward revisions to mortgage rate forecasts in its latest monthly economic update with projections for higher volumes than previously anticipated next year.
The government-sponsored enterprise revised the average 30-year fixed-rate mortgage projection for fourth-quarter 2025 to 6.4% from 6.5%, and the one for the same loan type a year further out to 5.9%. Fannie pegged the average mortgage rate for the current quarter at 6.6%.
The revisions arrive after the first fed-funds cut this year and ahead of a period when
President Trump has been working to lower rates amid resistance from traditionally independent decisionmakers that control them, and it
outcome. Turnover among policymakers that have this role is most likely in 2026.
Overall originations flat, home sales outlook dims further
So far, the rate environment is far more attractive to lenders than last year and in the last few weeks, while more near-term originations and refinancing application volumes have been flat to modestly higher.
Fannie's annual origination forecast was unchanged at $1.85 trillion for this year. Its projection for mortgage production rose a notch to $2.32 trillion from $2.26 trillion for 2026, but forecasts more than a year out tend to be more likely to fluctuate over time.
A separate Fannie Mae index that tracks refinance applications showed activity in that area was up considerably by 47.3% on the year and 24.6% on average in the last four weeks combined. However, that index was up just 4.5% from the previous business week as of Sept. 19.
Fannie revised certain indicators for home purchase demand lower in its latest monthly economic projections, with total seasonally-adjusted sales forecast to reach 4.72 million in 2025
The purchase volume forecast for 2025 weakened a notch but with many outstanding loans having rates much lower than those in the current market, it easily held onto its lead over the refinancing segment.
Fannie now forecasts there will be $1.37 trillion in homebuyer loans for 2025 as a whole, compared to last month's estimate of nearly $1.39 trillion. The 2025 refinance volume forecast clocked in at $481 billion. Last month's origination projection for refinancing was $466 billion.
How Fannie now views a key rate determinant
The GSE also has revised some aspects of its outlook for the Consumer Price Index and core CPI, the latter of which includes some adjustments that remove more volatile components of the inflation indicator.
Monetary policymakers typically become loath to lower the short-term fed funds rate when inflation readings are high because looser monetary policy can put more upward pressure on consumer prices.
Fannie now anticipates a 3.1% fourth-quarter CPI reading over last year's, down from 3.3% earlier, while leaving the 2026 projection at 2.6%. It revised the Core CPI outlook down a notch to 3.2% from 3.3%, with a bump upward to the 2026 forecast to 2.7% from 2.6%.
