Current interest rate levels are unlikely to budge until 2028 at the earliest, remaining within the same 10 basis point range for the next 18 months, according to a newly revised outlook from Fannie Mae.
The story should be much of the same in 2027 with the 30-year average not expected to dip to the 6.2% mark until the second quarter and then stay put throughout the remainder of the year, Fannie Mae said.
The latest predictions represent a noticeable shift in housing sentiment compared to
In regular monthly revisions to its outlooks, researchers saw changes pointing to the likelihood of stickier rates beginning with March's jump. The new rate outlook increased from April, when Fannie Mae researchers predicted 30-year averages in 2027 and 2028 to finish at 6.2% and 6.1%, respectively.
While the year started on an optimistic note for much of the lending industry, with hopes for increased volumes spurred by the steady drop of interest rates, uncertainty surrounding the duration of the Iran War brought in a cloudier forecast. The 30-year average leaped by 48 basis points from late February to the last week of March, coinciding with the war declaration, according to fellow GSE Freddie Mac's primary mortgage market surveys.
Iran War developments will continue to determine fortunes for the mortgage industry in the foreseeable future, as oil price movements ripple across the economy into consumer costs, Redfin economists said this week.
"Headline inflation remained elevated in April because of the continued spike in energy prices from the ongoing closure of the Strait of Hormuz," wrote Chen Zhao, Redfin's head of economic research, following the release of last month's Consumer Price Index.
Higher inflation also makes it less likely that the Federal Reserve will cut its benchmark rate in 2026, she added.
"In the near term, mortgage rates will continue to move less with any one economic data release and more with oil prices and developments in Middle East peace negotiations, which are the underlying driver of changes in the economic data," Zhao continued.
Fannie Mae's originations outlook
With rates likely to be higher than what was expected a few months ago, the likelihood of reduced refinance activity led Fannie Mae to lower prior originations predictions. The GSE currently sees production volume this year totaling $2.36 trillion compared to $2.38 trillion in its pre-war February outlook.
The May number, though, is higher compared to April's $2.34 trillion forecast, with Fannie Mae seeing current purchase demand still providing some momentum this year.
For 2027, the GSE lowered its projections to $2.49 trillion, compared to $2.52 trillion in February and $2.5 trillion one month ago.
