Economists and major housing groups, including Fannie Mae, predict that U.S. mortgage rates above 7% are the "new normal" and are likely to remain elevated well into 2027, with Fannie Mae forecasting an average of 7.5% in 2027. This contrasts sharply with the 3% or 4% rates seen before 2022. Factors contributing to this include persistently high inflation, increased competition for capital from heavy government borrowing and AI infrastructure investments, and weakened demand for mortgage bonds as the Fed has ceased active purchases of mortgage-backed securities.