Fannie Mae Expects Lower Mortgage Rates in 2025 and 2026 Will Bolster Home Sales

On Friday, Fannie Mae’s Economic and Strategic Research (ESR) Group released its March commentary. The ESR Group has slightly upgraded its existing-home sales outlook, based on a lower mortgage rate outlook.

The ESR Group now expects that mortgage rates will end 2025 at 6.3% and 2026 at 6.2%. This is a downward revision of 3/10 for each year. The lower mortgage rate outlook resulted in a small upward revision to the 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.

In a statement, Fannie Mae Senior Vice President and Chief Economist Mark Palim said:

“We expect the recent pullback in mortgage rates will provide a small boost to home sales this year. 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.”