Mortgage
Fannie Mae cuts 2027 origination forecast 18% as rates hold at 7.5%
By Real Estate Wire Staff, . Real Estate Wire.
Fannie Mae has dramatically revised its mortgage market outlook, cutting its 2027 single-family origination forecast by more than 18% and projecting that 30-year mortgage rates will average 7.5% through the end of next year, according to Scotsman Guide.
The government-sponsored enterprise now projects total single-family originations of $1.86 trillion in 2027, down from a September forecast of $2.28 trillion. Its 2026 estimate was trimmed more modestly, from $2.12 trillion to $2.08 trillion. The refinance market takes the sharpest hit: Fannie now projects just $430 billion in refi volume for 2027, a decline of more than 46% from its prior estimate. Purchase originations were revised down as well, to $1.43 trillion, a 2.8% reduction from the September figure.
The rate outlook driving those revisions is stark. Fannie now expects 30-year mortgage rates to average 7.5% through the end of 2027, compared to a September projection of 6.7%. The 10-year Treasury yield, to which mortgage rates are closely tied, is now forecast to end 2026 at around 5.3% and hold there through 2027, up from a prior projection of 4.8%.
On the Federal Reserve side, Fannie now expects the effective federal funds rate to reach 4.3% in the first quarter of 2027 and climb to 4.4% for the remainder of the year, implying two additional quarter-point hikes from the current target range of 3.75% to 4%. That is a more aggressive path than the firm projected in September, when it expected the rate to peak at 4.1% and hold flat.
Scotsman Guide attributes the deterioration to months of rising yields on US government debt following the outbreak of the Iran war in late February, combined with reaccelerated inflation driven by energy supply shocks, Trump administration tariffs, and heavy spending on artificial intelligence. Existing-home sales, the report notes, remain at 30-year lows for the fourth consecutive year.
The Mortgage Bankers Association, whose economists spoke at the group's annual conference in Chicago this week, confirmed that rates have hovered around 7.5% over the past two weeks. MBA economists said those higher rates are "making their mark" on the housing and mortgage sectors, and the association expects rates to stay between 7% and 7.5% through the end of 2027.
Consumer prices were up 3.4% year over year as of August 2026, according to the US Bureau of Labor Statistics. That persistent inflation, running above the Fed's target, is the backdrop against which the central bank raised rates in September and is widely expected to tighten further, a dynamic that makes any near-term relief on mortgage rates unlikely.
For originators, the picture is straightforward and difficult. A refi market of $430 billion is not a refi market in any meaningful sense; it is residual volume from borrowers who have no choice. Purchase originations at $1.43 trillion are constrained by affordability, not by lack of demand, and with existing-home sales locked at multi-decade lows, the transaction pipeline that would normally drive purchase volume is not there. The gap between Fannie's September forecast and its current one is not a rounding error; it is a structural reassessment of when rates might fall, and the answer is now: not in 2027.
What the forecast does not resolve is whether the Fed's expected tightening will actually bring inflation under control quickly enough to allow any rate relief before 2028, or whether the 7.5% rate environment becomes the baseline that lenders and buyers have to plan around for longer than the current projections suggest.
Source: https://www.scotsmanguide.com/news/fannie-mae-slashes-origination-forecast-by-18-for-2027/