Each month, Fannie Mae releases a forecast for home prices, sales, and mortgage rates, among other things.
Between September’s report and October’s, they raised their estimate for the 30-year fixed a staggering 80 basis points (0.80%).
The unusually large move reflects just how bad mortgage rates had it over the past month and change.
But the last week saw a bit of a recovery and raising their forecast so aggressively month-to-month might be unwarranted.
Depending on how things go, mortgage rates could actually move lower in 2027.
Fannie Mae Says Mortgage Rates Will Average 7.5% for All of 2027
In Fannie Mae’s October 2026 Housing Forecast, they increased the expected 30-year fixed average to 7.5% for all four quarters next year.
Previously, these estimates were 6.7% for each quarter, representing a massive 80-bp increase.
The reason is pretty straightforward. There was a global bond rout over the past month that led to the highest bond yields in decades.
And it seemed like it was just going to keep getting worse, with no relief in sight.
But then we got a reversal last week, which is not reflected in Fannie Mae’s latest report, dated on October 12th.
So there is some matter of timing here, with Fannie capturing the absolute worst of the mortgage rate increase (and none of the recovery).
Of course, mortgage rates are still pretty elevated, around 7.40% at last glance, per Mortgage News Daily.
In other words, they remain very much near the top of their recent range, even if they enjoyed a little pullback last week.
That means Fannie’s estimate doesn’t sound crazy here, but it does feel a little like they’re overshooting.
To raise your forecast nearly one full percentage point from one month to the next seems excessive.
However, they could turn out to be right if the economic data keeps coming in hot and bond yields stay elevated.
Is Fannie Being Too Pessimistic on Mortgage Rates?
Ultimately, Fannie Mae and other forecasters just look at the data in front of them when drawing up their reports.
So if the 10-year bond yield was 5.25% when they drafted the report and they saw an implied spread of say 230 bps, it wouldn’t be much of a surprise to say mortgage rates will average 7.6% next year.
But yields have since come down to around 5.15%, and it’s possible they could keep falling if the story of last week (tech selloff) continues.
There are some who feel the bond rout was overdone and yields could be attractive at current levels.
The logic is tech stocks are risky now and might yield negative returns going forward, while a government bond is guaranteed and paying more than 5%.
All of a sudden there’s a shift from equities to bonds, especially if investors also sour on AI-related bonds, which are getting labeled high-risk nowadays too.
Long story short, if we see the recent flight to safety hold, mortgage rates could actually move lower in 2027.
[Compare mortgage payments side by side with my mortgage rate calculator.]
How Mortgage Rates Could Defy the Predictions and Get Back Below 7%
Right now we’ve got basically everything working against low mortgage rates.
We have a war in the Middle East (and elsewhere), all of which is putting pressure on energy prices and thus inflation.
We have (had) a global bond rout where investors were balking at buying bonds, even with the highest yields in decades.
And we’ve had economic data continue to come in hotter-than-expected, whether it was a healthy jobs report, CPI, or retail sales.
So on the one hand, you could argue that mortgage rates are priced for the absolute worst.
That means you get one or several of the above issues to reverse course and mortgage rates can come down as well.
In that sense, there are a lot of possible levers to pull to get mortgage rate relief, but none are guaranteed to materialize.
But if they do, it wouldn’t be improbable to get the 30-year fixed back below 6% in 2027 and beyond.
Read on: How to track mortgage rates.
- Fannie Mae Ups 2027 Mortgage Rate Forecast to 7.5% - October 19, 2026
- Mortgage Rates Keep Falling on AI Rout, But Will It Last? - October 16, 2026
- Mortgage Rates Plummet Despite Hot Wholesale Inflation Report - October 15, 2026