Economists at Fannie Mae ( Fannie Mae ) currently predict that mortgage rates will rise significantly by the end of 2026 and in 2027.

The institution now expects that the average interest rate for 30-year fixed-rate mortgages will reach 7.4% in the fourth quarter of this year and remain at 7.5% throughout next year. Previously, Fannie Mae predicted 6.8% for the fourth quarter of this year and 6.7% for the entire next year.

According to the data from Mortgage News Daily, the average interest rate for 30-year fixed-rate mortgages was reported at 7.46% on Tuesday, but it may rise further today. Bond yields increased after a report on inflation that was higher than expected was released.

Since early September, mortgage rates have been rising significantly due to persistently high inflation and a sell-off in the bond market caused by various factors. For the first time in over three years, the Federal Reserve has also raised its benchmark interest rate. Mortgage rates do not necessarily follow the changes in the Fed's rates exactly, but they do respond to the central bank's assessment of future inflation.

Mortgage rates generally follow the yield of 10-year U.S. Treasury bonds, which have risen significantly due to rising oil prices and increased concerns about the global economy.

Higher interest rates have clearly cooled down the housing market this autumn. Zillow data shows that sales pending completion, calculated based on existing housing contracts, decreased by 8.5% in September compared to the same period last year. As homebuyers face higher prices and a deteriorating affordability, demand for mortgages continues to decline significantly. Not only is the number of people who can afford to buy a house decreasing, but so is the number of people who qualify for mortgage loans.

Fannie Mae did not respond to requests for comments on its latest forecasts.