Two of the housing industry's most closely watched forecasters now expect the 30-year fixed mortgage rate to remain above 7% into 2027, a projection that would extend the worst affordability stretch for American home buyers in more than two decades.
The Mortgage Bankers Association and Fannie Mae both revised their outlooks this month, pushing any return to the 6% range past next year. The MBA now sees the 30-year fixed rate averaging 7.1% in 2027, while Fannie Mae's latest housing forecast puts it at 7.2% for the same period.
The forecasts matter because mortgage rates set the monthly payment on the largest debt most American households ever take on. At 7%, a buyer financing a $400,000 home with 20% down pays roughly $2,130 a month in principal and interest, about $500 more than the same loan at the 4.5% rates common in early 2022.
The rate picture has shifted because the Federal Reserve's expected path of interest rate cuts has narrowed. Fed officials have signaled they will move slowly on reducing the federal funds rate, which sits in a range of 4.25% to 4.5%, as inflation remains above the central bank's 2% target. Mortgage rates track the 10-year Treasury yield, which in turn responds to expectations about Fed policy and inflation.
"The days of sub-5% mortgage rates are not coming back anytime soon," said Mike Fratantoni, chief economist at the Mortgage Bankers Association, in a statement accompanying the group's forecast.
Existing homeowners have felt the effect differently. Roughly 60% of outstanding mortgages carry rates below 4%, according to data from the Federal Housing Finance Agency, which has locked millions of households into their current homes and kept inventory historically tight.
That dynamic has cut both ways. The National Association of Realtors reported existing home sales fell to a 30-year low in 2024, and while sales have ticked up modestly since, they remain well below the pace of 2021, when rates averaged under 3%.
Builders have adjusted by buying down rates on new construction. Roughly 60% of new home sales in recent months have included some form of rate buydown, according to data from John Burns Research and Consulting.
The 30-year fixed rate stood at 6.9% as of the latest Freddie Mac Primary Mortgage Market Survey, down slightly from a peak of 7.8% in October 2023 but still more than double the 2.65% recorded in January 2021.
For buyers waiting on the sidelines, the forecasts suggest there is little financial advantage to waiting another year. For sellers, the calculus is different: holding a low-rate mortgage while listing a home means trading a sub-4% loan for one above 7% on the next purchase.
