Expect modest increases in mortgage rates over the next 18 months, which will slow originations to near $1.77 trillion, advises the Mortgage Bankers Association of America (MBA) in its annual economic forecast.

The final volume of loans in 2002 is likely to approach $2.42 trillion, which would be the greatest origination volume in history, according to MBA. Despite the falloff from this year’s totals, the $1.77 trillion origination volume for 2003 is projected to be the third highest on record due to the combination of low interest rates and accumulated home value appreciation.

The economy still faces problems that reflect the bursting of the bubbles in the stock market and the high-tech industries, the Washington, D.C.-based organization reports. Going forward, consumer spending is apt to slow in response to the huge loss of wealth associated with declines in equity prices. Business spending also is expected to remain weak.

"In the absence of a sharp and sustained rate increase, outright price declines are unlikely," predicts Doug Duncan, MBA senior vice president and chief economist, in a statement. "Demographic factors and modest supply will both support a strong market."