The latest mortgage rate forecast from Fannie Mae is a good one, assuming you’re a prospective home buyer or an existing homeowner.
The government-sponsored enterprise (GSE) lowered their forecast pretty dramatically from a month earlier.
They now expect the 30-year fixed to be a full 30 basis points lower by the end of 2025. And 30 basis points lower at the end of 2026 as well.
Instead of a rate of 6.6% to close out 2025, they now see the 30-year falling to 6.3% instead.
This should come as welcome news to anyone looking to save some money on their mortgage.
Lower 10-Year Yields = Lower Mortgage Rate Forecasts
Fannie Mae noted that the 10-year Treasury yield has “pulled back notably” from levels seen as recently as mid-January.
As such, they now expect mortgage rates to be lower since a lower 10-year yield translates to lower mortgage rates.
That happened to coincide with Trump’s inauguration. It seemed to be a sell the news event, where once he entered office stocks fell and bonds began to rally.
Of course, this has been driven by a deteriorating economic outlook, so it might be bittersweet news.
In other words, you might be able to snag a slightly lower interest rate but your job security could be worse. Not exactly the best tradeoff in the world.
Fannie Mae seems to primarily use the 10-year bond yield to come up with their monthly mortgage rate forecast.
And because it has fallen about 25 basis points, they’ve revised their rate outlook by a similar amount.
Instead of 6.6% by the end of 2025, they now expect a rate of 6.3%.
Their 2026 rate forecast also improved by 30 basis points (.30%) from 6.5% to 6.2%.
Fannie never gets too aggressive in their forecasts, as they simply have rates falling from 6.3% at year-end 2025 to 6.2% in 2026.
But I look at the trajectory more than the actual figures to get a sense for where rates might go.
In other words, they could actually go a lot lower than Fannie expects given their conservative nature. And if the 10-year yield continues to fall, Fannie will keep revising their forecast lower as well.
Note that they revise these numbers each month, so their forecast is an ever-changing thing, not a one-off year-ahead thing like my annual mortgage rate predictions.
What is interesting though is Fannie only projects one Fed rate cut in September, followed by two more cuts in 2026.
Meanwhile, CME FedWatch still has odds on three rate cuts this year alone. Not that the Fed controls mortgage rates, but Fannie could be playing it safe here.
Still a Ton of Uncertainty Surrounding Mortgage Rates
To that end, they said, “there is an unusually high degree of uncertainty regarding the path for growth and inflation during the rest of 2025, which adds risk to our interest rate forecasts.”
I’ve echoed this sentiment recently because there is so much up in the air, whether it’s the DOGE government layoffs, ongoing trade war, and global tariffs.
This makes it especially difficult to forecast mortgage rates, especially when they’re already hard to forecast to begin with in a normal environment.
When it comes down to it, most mortgage rate forecasters get it wrong time and time again.
They were wrong when mortgage rates hit record lows (they expected them to go up) and they were wrong when they hit 8% (they didn’t expect them to go that high).
So it’s never a great idea to put a lot of stock into these predictions.
However, the growing sentiment for lower mortgage rates later this year does seem to be picking up speed, and could indicate that they’ll actually be lower.
In my 2025 mortgage rate forecast post, I said the 30-year fixed would likely fall below 6% by the fourth quarter. Specifically, I said 5.875%.
I still believe that will happen, though the uncertainty, which seems to be the keyword lately, might cause rates to bounce around at higher levels for a while.
And could keep them elevated for longer, even if they do eventually come down once the dust settles.
Ultimately, mortgage lenders and MBS investors don’t want to get caught out by surprise, so pricing will continue to be cautious for the foreseeable future.
Remember, lenders are quick to raise rates, but always take their sweet time lowering them.
However, thanks to this improved mortgage rate forecast, Fannie expects home purchase loan volume to increase 10% year-over-year in 2025 to $1.4 trillion (up $12 billion from last month’s forecast).
They also expect refinance loan volume to rise to $502 billion in 2025, a $38 billion boost from their February forecast.
Good news for both mortgage loan originators and home buyers and homeowners.
Read on: Should I Wait for Mortgage Rates to Drop Before Buying a Home?
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.