Fannie Mae forecasts mortgage rates at 6.3% by year-end 2025, boosting home sales slightly. Rates may drop further, encouraging more buyers off the sidelines.
WASHINGTON - Mortgage rates are now expected to end 2025 and 2026 at 6.3% and 6.2%, respectively, downward revisions of three-tenths for each, according to the March 2025 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group. The lower mortgage rate outlook resulted in a small upward revision to the ESR Group's existing home sales outlook in 2025, though expectations for total home sales remain subdued. On a Q4/Q4 basis, real gross domestic product (GDP) is now expected to be 1.7% in 2025 and 2.1% in 2026, modest downward revisions owing to weaker incoming data and greater clarity on trade policy.
"We expect the recent pullback in mortgage rates will provide a small boost to home sales this year," said Mark Palim, Fannie Mae senior vice president and chief economist. "While our latest forecast calls for a period of modestly slower economic growth, historically, interest rates have been the most important driver of home sales. We think mortgage rates will move even lower within the next quarter and ultimately close the year at approximately 6.3%, which could be low enough to generate some extra sales from any would-be buyers still waiting on the sidelines."
About the ESR Group
Fannie Mae's Economic and Strategic Research Group, led by Chief Economist Mark Palim, studies current data, analyzes historical and emerging trends, and conducts surveys of consumer and mortgage lender groups to provide forecasts and analyses on the economy, housing, and mortgage markets.
Source: Fannie Mae
