Fannie Mae slashes 2027 mortgage forecast amid higher rates

Fannie Mae’s Economic and Strategic Research Group cut its 2027 mortgage origination forecast by 18% in its October outlook, signaling that mortgage rates are expected to stay higher and refinance volume will remain weak. The ESR Group now projects total single-family originations in 2027 will reach $1.86 trillion, down from $2.27 trillion in its September forecast. For this year, Fannie Mae economists still expect about $2 trillion in volume. Higher rate assumptions are driving the downgrade, with the Federal Reserve (Fed) expected to continue raising interest rates — the next Federal Open Market Committee meeting concludes Oct. 28. Fannie Mae now expects 30-year mortgage rates to average 7.5% in 2026, up from 6.7% in the September outlook. Refinance activity takes the brunt of the revision. Fannie Mae now expects 2027 refinance originations of about $430 billion, roughly half of the prior $802 billion estimate and below the approximately $695 billion projected for this year. Purchase originations are forecast to total $1.4 trillion in 2027, essentially flat with this year, underscoring that the market will remain purchase-driven. On the macroeconomic front, the ESR Group kept its...