As inflation continues to rise, MBA economists discuss where the market is headed in 2027
A hotter-than-expected inflation report on Wednesday combined with a volatile bond market continues to paint a bleaker picture of market conditions heading into 2027.
Consumer prices rose 3.7% from a year earlier in September, according to the latest numbers released on Wednesday. That caused the 10-year Treasury yield to spike by 10 basis points before dropping three basis points from day-opening levels in the afternoon.
Days after the Mortgage Bankers Association (MBA) announced its updated forecast, pushing rates higher and originations lower than originally expected, Fannie Mae followed suit. Fannie’s forecast is for a 30-year fixed-rate mortgage to be 7.4% in Q4 and 7.5% throughout 2027.
Despite the conditions, brokers still have deals to get done. One mortgage executive suggests that the ones who make it through the current headwinds will come out stronger on the other side.
Desmond P. Smith (pictured top), EVP and chief growth officer at United Wholesale Mortgage (UWM), said a market like this one will test which originators are in it for the long haul.
"The people who are committed to this business will be fine," Smith told Mortgage Professional America. "I hate to say it this way, and some people may say it's negative, it's probably okay to weed some people out."
Mindset over rates
Gasoline prices rose 9.1% in September and accounted for about half the inflation increase, according to the Bureau of Labor Statistics. Core inflation, which strips out food and energy, rose to 2.6% from 2.4% in August.
As of Wednesday, CME Group's FedWatch tool showed a 34.9% chance of a Federal Reserve rate hike in October. It showed a 61.6% chance of the fed funds rate being 25 basis points higher than now in December, and a 30.8% chance that the fed funds rate would be 50 basis points higher.
On Tuesday, MBA chief economist Mike Fratantoni said events overseas have played a big role in the changing rate forecast.
"We started 2026 with mortgage rates briefly below 6%, and saw just how much of an impact that had on both refinance and purchase volume," Fratantoni told Mortgage Professional America. "It really, really caught folks' attention. Because I think now most buyers in the market, they recognize that a low 6% or below 6% is a very good rate. Seven percent is not a good rate, but they're not looking for a 3% rate anymore. That's where we started the year.
“The war immediately brought long-term rates up a half a percentage point. The path over the last month or so obviously went a full percentage point higher than that. The Middle East conflict is absolutely the variable that really threw our forecast off."
The MBA expects the Fed to raise rates in December and again in the first quarter of 2027, with 30-year mortgage rates staying above 7% through all of next year. Smith said brokers to keep pushing ahead regardless of where rates settle.
"Rates are what they are," Smith said. "So you either get to create your own reality, which probably means you've got to work harder. You're probably going to work harder and make less. You're going to have to work harder and maybe not do as much, but if you keep the activity, you will be fine. And you will earn customers and clients."
At the Association of Independent Mortgage Experts (AIME) Fuse event in Austin, UWM president and CEO Mat Ishbia had told brokers to stay positive whatever rates do. Smith took that message and talked through what it takes in practice.
"The mindset piece here is everything," he said. "If you want to talk to people like, ‘Woe is me,’ yeah, okay. But that's not going to do anything to help you win in today's market. You can win. But you've got to believe you can win before it can happen. What are the actions you're taking to get the results you want? I think a lot of it's mindset: what you want to do, what you're willing to do. And you say, I want to do all these things. Do your actions support your words?"
Finding the business
Smith, who has spent 35 years in the industry, was asked what excites him about 2027. He answered for the industry first.
"Do you think of yourself as a professional loan officer, or are you just doing a job?" he said. "If this is your profession, you will come into February of next year doing great. But you’ve got to believe in yourself, right? Some companies are probably going to go away. Some LOs are going to leave the business. I'm not upset about that, because this wasn't a profession to you. This was a job you were doing."
One analyst put into perspective some of the industry’s contraction. Marina Walsh, vice president and head of industry analysis at the MBA, said about 4,600 companies are still originating loans. Independent mortgage companies numbered 881 at their 2021 peak, and 707 at the end of 2025, and industry employment is down more than 35% over the past four and a half years.
"That doesn't even account for what's happened this past year," Walsh told Mortgage Professional America. "So it's been a movement toward consolidation already. I do think that M&A activity may continue, especially if companies feel like they have to make big investments, big technology investments, and they're not capable of doing that."
Smith said the AIME event itself is part of how brokers get through a slow stretch.
"Sometimes in markets like this, they need this even more," he said. "You need to see there are other people around you experiencing the same thing you're experiencing, other people around you who have nothing but conviction for wholesale."
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