MBA Also Raises '03 Estimate

The Mortgage Bankers Association of America has announced that, thanks to falling interest rates, it is now forecasting that mortgage originations will total $3.3 trillion this year, far exceeding the record of $2.5 trillion set in 2002.

In its latest Mortgage Finance Forecast, the MBA estimated that 68% of the $3.3 trillion in loans will be refinancings. The total volume of mortgages for home purchases is expected to reach $1.07 trillion by the end of the year, up 5% from $1.02 trillion in 2002. "Part of the increase in the volume is due to higher home prices and average mortgage amounts, but in addition, about 6.8 million single-family units are expected to be sold this year, a 3.5% increase over 2002," the MBA said. The surge in refis has been driven by falling interest rates. "The Federal Reserve on May 6 indicated its concern over the possibility of deflation, and the financial markets responded by pushing down interest rates on long-term Treasuries and mortgage instruments," said MBA chief economist Doug Duncan. Mr. Duncan said he expects the Fed to cut the Federal Funds Rate target by at least 25 basis points at its policy meeting June 24-25, and not to raise the short-term rates until the middle of next year.

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