U.S. mortgage group cuts loan forecast as rates jump

NEW YORK (Reuters) - A U.S. mortgage industry group on Monday slashed its forecast for 2009 loan originations by more than 25 percent as higher mortgage rates depress refinancings.

The Mortgage Bankers Association estimates that lenders will make $2.03 trillion in new home loans this year, down by more than $700 billion from its forecast in March.

The Washington-based group attributed $84 billion to reduced lending on home purchases.

The rest of the decline would be from fewer refinancings and "very low" volumes on an affordability loan program overseen by mortgage agencies Fannie Mae and Freddie Mac, MBA said in a statement.

Mortgage rates have risen from record lows since the MBA's prior forecast as have Treasury yields, which spiked amid a flood of debt issuance needed to fund federal rescue programs.

In March, the MBA boosted its forecast of mortgage originations by more than $800 billion but reversed most of that expected increase with Monday's revision.

Average 30-year loan rates have slipped from recent peaks but at 5.38 percent last week remain well above the record low 4.78 percent set in April, Freddie Mac reported on Thursday.

The higher rates have quelled refinance demand.

The MBA's index of refinancing applications in the week ended June 5 sank to 2,605.7 after hovering between about 5,100 and 6,800 from the March 20 week through the end of April.