Fannie Mae is now predicting 30-year fixed mortgage rates will average 6.8% in the fourth quarter of 2026 and hold at that elevated level through the first half of 2027, according to the mortgage-finance giant’s August Housing Forecast, released this week by its Economic and Strategic Research Group.<\/p>\n
The revision marks a sharp increase from the forecast issued just a month earlier. Fannie Mae’s July 2026 outlook had called for 30-year fixed rates to average 6.4% through the rest of 2026, before easing to 6.3% over the first three quarters of 2027 and dropping to 6.2% by the fourth quarter of that year. The new August 2026 forecast erases that expected decline entirely: rates are now projected to average 6.7% in the third quarter and 6.8% in the fourth quarter of 2026, before holding at 6.8% through the first half of 2027 and easing only slightly, to 6.7%, in the second half.<\/p>\n
Taken together, Fannie Mae now projects the 30-year rate will average 6.5% for all of 2026 and 6.7% for 2027 — as much as half a percentage point higher than the trajectory it had penciled in just weeks earlier, and the steepest one-month upward revision the government-sponsored enterprise has made so far this year.<\/p>\n
The forecast lands as actual mortgage rates have already moved higher. Freddie Mac’s weekly survey put the average 30-year fixed rate at 6.67% in mid-August, while Mortgage News Daily’s daily reading was running closer to 6.72% — both near one-year highs.<\/p>\n
Why rates are moving higher<\/strong><\/p>\n Economists trace much of the shift to the prolonged war involving the U.S., Israel and Iran, which began in late February 2026 and has continued to flare despite periodic ceasefires. The conflict has disrupted oil supplies and shipping through the Strait of Hormuz, pushing crude prices higher and reviving inflation fears. Consumer prices rose 3.4% in July from a year earlier, up from 2.4% in January, before the fighting started. Because inflation erodes the value of a bond’s fixed payments, investors have demanded higher yields to hold Treasurys, pushing the 10-year Treasury yield — the benchmark that mortgage rates track most closely — from below 4% before the war to above 4.7% this month. The 30-year Treasury bond yield touched 5.32% this week, its highest level in 19 years.<\/p>\n That inflation pressure has also boxed in the Federal Reserve. With price gains still running well above the central bank’s 2% target and the labor market not soft enough to justify easing, the Fed has stayed on hold, with traders assigning roughly one-in-three odds to any move — up or down — at its next meeting. Some economists say a rate hike, not a cut, is now the more likely next move if the war and its inflationary effects persist.<\/p>\n Ripple effects for lenders and buyers<\/strong><\/p>\n The higher-for-longer outlook is already reshaping Fannie Mae’s other projections. The GSE trimmed its forecast for total mortgage originations to roughly $2.17 trillion, down from nearly $2.3 trillion previously, and lowered its estimates for existing- and new-home sales in 2026. Refinance activity, which made up nearly half of originations in the first quarter, has since fallen to about 25% of volume, though Fannie Mae expects it to climb back to roughly 34% by year-end.<\/p>\n Not every signal in the report was negative. Fannie Mae nudged up its forecast for single-family housing starts and left its home-price outlook unchanged, still projecting 2.3% appreciation this year. Lenders, meanwhile, remain broadly profitable: the Mortgage Bankers Association reported this week that the average company earned $973 per loan originated in the second quarter.<\/p>\n Still, with rates now expected to sit near 6.7%-6.8% for the next year and a half rather than drifting toward 6.2%, affordability pressure on homebuyers is likely to persist well into 2027 — a shift that Fannie Mae itself did not anticipate as recently as July 2026.<\/p>","protected":false},"excerpt":{"rendered":" Fannie Mae Sharply Raises Rate Forecast as Inflation Risks from Iran War Persist Fannie Mae is now predicting 30-year fixed mortgage rates will average 6.8% in the fourth quarter of 2026 and hold at that elevated level through the first half of 2027, according to the mortgage-finance giant’s August Housing Forecast, released this week by […]<\/p>","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-63840","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\n