Brokers face a leaner 2027 as the mortgage giant’s new outlook slashes refinance volume and keeps borrowing costs above 7%
Fannie Mae no longer sees meaningful mortgage rate relief on the horizon. The mortgage giant now expects the average 30-year fixed mortgage rate to hold at 7.5% through all of 2027.
In its October 2026 Housing Forecast, Fannie Mae’s Economic and Strategic Research (ESR) Group projected that the benchmark rate will average 7.4% in the fourth quarter of 2026 and then settle at 7.5% in every quarter of 2027.
Its previous forecast called for 6.8% this quarter and 6.7% for next year, which puts the 2027 revision at 0.8 percentage points.
The new figures may already trail the market. Fannie Mae based its rate assumptions on levels as of Sept. 30.
By Oct. 13, the 30-year fixed averaged 7.46%. Bond yields rose again on Wednesday after Bureau of Labor Statistics data showed annual inflation running at a hotter-than-expected 3.7% in September.
What is pushing the mortgage rate forecast higher?
Mortgage rates loosely track the 10-year Treasury yield, which has climbed on higher oil prices and mounting concern about the global economy. The Federal Reserve added pressure on Sept. 16 by raising its benchmark rate a quarter point to a range of 3.75% to 4%. It was the Fed’s first hike in more than three years.
Mike Fratantoni, chief economist at the Mortgage Bankers Association (MBA) in Washington, D.C., told the group’s annual conference that the forces at work run deeper than one policy decision.
“Inflation is too high, leading central banks to raise short-term rates, while budget deficits and debt are unsustainably high, leading bond investors to push up longer-term rates,” he said.
Selma Hepp, chief economist at Cotality, has made a similar case. “It’s really the bond market,” she said, while warning that mortgage rates could hit 9%.
"It's possible that mortgage rates go up to 9%, but it's really not our base case scenario. It's more of a severe scenario in which Treasuries go up to 6% or 7% and that would be really triggered by several major disruptions."
Mike Fratantoni, Joel Kan, and Marina Walsh of the Mortgage Bankers Association expect mortgage originations to fall in 2027, with rates remaining above 7% and refinance opportunities staying limited despite steady purchase activity. https://t.co/3WmwWuhSWh
— Mortgage Professional America Magazine (@MPAMagazineUS) October 13, 2026
What higher rates mean for broker pipelines
The lending projections show the cost. Fannie Mae now expects single-family originations to fall from about $2.09 trillion in 2026 to $1.87 trillion in 2027, a drop of roughly 11%. Purchase volume holds near $1.43 trillion.
Refinance lending, however, shrinks from $655 billion to $430 billion, which cuts the refinance share of originations from 31% to 23%.
Home price growth also slows: Fannie Mae’s Home Price Index is forecast to rise just 0.6% in 2027, down from 2.7% this year.
Demand is already fading. Mortgage applications fell for a seventh consecutive week in MBA’s latest survey. Zillow’s September report on slumping pending sales showed buyers retreating as affordability worsened.
The Fed meets again Oct. 27-28, and officials have penciled in one more hike this year.
For brokers, Fannie Mae’s numbers point to a 2027 driven by purchase business, with refinance volume down by about a third.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
