The Mortgage Bankers Association is predicting $2.5 trillion in mortgage originations in 2004, according to its quarterly update of its Mortgage Finance Forecast.

“June’s employment data, showing slower jobs growth, does not mean the economy is faltering,” said MBA chief economist Doug Duncan. “Consumer spending remains strong and business expenditures are strengthening, supported by rising corporate profits. The slowing pace of growth to a sustainable level is to be expected after the very strong growth during the second half of 2003.”

The group had previously estimated $2.4 trillion in originations, with refinances making up $1 trillion of that and home purchase loans making up the rest, or $1.4 trillion.

The group is still predicting $1.4 trillion in mortgages for home purchases, but has revised its forecast of refinancings to $1.1 trillion.

MBA also expects interest rates to rise this year, with the 30-year fixed mortgage rate reaching 6.5 percent in the fourth quarter.

MBA forecasts home sales in 2004 will surpass last year’s volume of 7.2 million units by 3.5 percent before slowing in 2005 and beyond. Home sales are expected to drop by nearly 11 percent in 2005 from the 2004 levels and remain relatively flat at that level for the remainder of the forecast period.

Looking beyond 2004, MBA sees a slowing of the market as interest rates continue to rise because of continued economic expansion. The Federal Open Market Committee will continue its measured pace of increasing short-term interest rates, which will eventually lead to a flattening of the yield curve at a higher level of interest rates, the group said. The adjustable-rate share of mortgages will fall, as will total loans. MBA expects total originations to average around $1.8 trillion for the 2005-07 time period.

Washington, D.C.-based Mortgage Bankers Association is a national association representing the real estate finance industry.

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