Mortgage Rates Are Forecast Above 7% Through 2027, and Buyers Aren’t Coming Back

The average 30-year fixed mortgage rate stood at 7.31% early Wednesday, according to Bankrate, down from 7.38% on Tuesday. Freddie Mac‘s weekly survey put the same loan at 7.32% on October 22, and the Mortgage Bankers Association’s contract rate was 7.41% for the week ending October 16. The three surveys disagree by design: Freddie Mac tracks prime borrowers putting 20% down, Bankrate averages lender quotes, and the MBA records contract rates with points. Every one of them sits above 7%.

Mortgage applications fell 5.3% in the week ending October 16, the Mortgage Bankers Association reported on October 21. It was the seventh consecutive weekly decline. Purchase applications dropped 7% from the previous week and stood 18% below the same week a year earlier, while refinance applications fell 2% on the week and 59% from a year earlier. Joel Kan, the MBA’s vice president and deputy chief economist, said lower rates were not enough to boost activity: “Purchase applications fell 18 percent behind last year’s pace, as higher rates are pricing buyers out of the market.”

The refinance share of applications rose to 39.0% from 37.7% in that same week, while refinance volume itself fell 2%. Purchase applications fell 7% in the same week, faster than refinancing, and that gap is what lifted the share. Signed contracts told the same story in September. The National Association of Realtors’ pending home sales index fell 7.3% to 66.0, the lowest reading since the series began in 2001, and 11.3% below a year earlier. The West fell 9.2% in the month. Lawrence Yun, the association’s chief economist, attributed the drop to fast-rising mortgage rates and said buyers and sellers appeared to be waiting for rates to move in their favor.

Fannie Mae‘s October housing forecast, published October 14 from tables dated October 12, put the average 30-year fixed rate at 7.4% in the final quarter of 2026 and 7.5% in every quarter of 2027. A month earlier, the same forecast had 6.8% for this quarter and 6.7% for 2027. Before the war in Iran began in late February, Fannie Mae had penciled in about 6% for both years. The October tables used interest rates as of September 30, so they were already behind the market when published. The daily 30-year rate reached 7.46% on October 13 and 7.56% on October 14, after September’s consumer price index rose 3.7% from a year earlier.

The Mortgage Bankers Association expects the 30-year rate to average 7.3% in the final quarter of 2026 and stay above 7% through 2027. Fannie Mae’s revision lowered 2027 existing-home sales to 4.06 million from 4.22 million, total sales to 4.71 million from 4.88 million, and home price growth to 0.6% from 1%. Refinancing volume, the part of the market that depends most on lower rates, was cut to $430 billion from $655 billion, a 34% drop, while purchase lending was left essentially flat at $1.435 trillion against $1.429 trillion.

Principal and interest on a $400,000 loan, before taxes, insurance and fees, comes to $2,748 a month at 7.32%. At 6.19%, the average a year earlier, the same loan cost $2,447, a difference of $301 a month, or $3,612 a year. The week’s decline from 7.40% to 7.32% saved $22 a month on that loan. The forecast revision costs more than either of those numbers: at 7.5% instead of 6.7%, the monthly payment is $2,797 instead of $2,581, a difference of $216 a month on the same $400,000 loan.

Emma Finestone and her wife, first-time buyers closing on a house in Cleveland, told the Wall Street Journal that the recent surge arrived at the worst moment. “Right now, we’re dealing with this huge jump at the last minute, and as first-time home buyers, that’s something we weren’t expecting,” she said. Mark Fleming, chief economist at First American, told the Journal: “For a lot of the affordability-constrained borrowers, they don’t have the option.”

Adjustable-rate mortgages were 10.5% of applications in the week ending October 16, the highest share since October 2025, according to the MBA. The 5/1 ARM averaged 6.46% on the MBA survey against 7.41% for the 30-year fixed, a gap of 95 basis points, and 6.24% against 7.38% on Bankrate’s daily table. At the start of the year, ARMs were 6.3% of applications; by the week of September 18 they were 9.8%, the Journal reported.

Mortgage rates follow the yield on the 10-year Treasury note, not the Federal Reserve‘s benchmark rate. The 10-year yield stood around 4.99% on Tuesday, according to Reuters, after spending much of the past few weeks above 5%, and the MBA expects it to average 5.1% in the final quarter of 2026 and stay near 5% through 2027. The Treasury estimated in August that it would borrow $628 billion in privately held net marketable debt in the final quarter alone. Mike Fratantoni, the MBA’s chief economist, said inflation was running above target and budget deficits and debt were unsustainably high, pushing long-term yields up. Bob Michele, head of global fixed income at J.P. Morgan Asset Management, told reporters in Singapore that bond markets offered a “generational amount of yield.” Real yields stood at 3%, he noted, for the first time since 2002, and he expected the federal funds rate and the Treasury curve to converge around 4.5%. Selma Hepp, chief economist at Cotality, told CNBC that investment in AI data centers, power generation and related infrastructure was increasing competition for capital.

Freddie Mac’s weekly 30-year average stood at 5.98% on February 26 and reached 7.40% on October 15, its highest in 52 weeks, before easing to 7.32% on October 22, the first weekly decline since August 20. The Federal Reserve raised its benchmark rate by 25 basis points in September. Traders put the chance of no change at this week’s meeting at 90.6% on Tuesday, up from 35.8% a month earlier, according to CME Group’s FedWatch tool as reported by HousingWire. Washington’s answer last week was a housing-cost executive order aimed at mortgage insurance and closing costs.

For the week ending October 16, the average contract rate on a 30-year jumbo loan fell to 7.33% from 7.49%, and the rate on a 30-year loan backed by the Federal Housing Administration fell to 7.13% from 7.19%, according to the MBA survey. The FHA share of applications slipped to 16.3% from 16.4%, and the VA share to 11.5% from 11.9%.