The MortgageBankers Association is sticking by its forecast that overallnumbers of housing finance loans made in 2014 will decline 32% fromthis year.

That would mean that credit union and other housing financelenders will have to compete for a piece of a significantly smaller mortgage market.

The association also forecast the numbers of purchase moneyloans – new mortgage loans as opposed to refinance loans – willrise by 9%, but acknowledged there will be a significant gap inmortgage originations next year over this year.

“We expect mortgage rates will increase above 5% in 2014 andthen increase further to 5.5% by the end of 2015,” said the MBA'schief economist, Jay Brinkmann.

“As a result, mortgage refinancing will continue to drop, andborrowers seeking to tap the equity in their homes will be morelikely to rely on home equity seconds rather than cash-outrefinances,” Brinkman said.

“We will potentially see a small increase in refinances towardthe end of 2015 as the Home Affordable Refinance Program 2.0expires but HARP activity during 2014 will still be low,” headded.

The association also stuck by its optimistic economicprojections, though Brinkmann did not mention what might happen tothe forecast if U.S. spending and taxation debates are notresolved.

“Our forecast for the increase in the purchase market is basedon our expectations for ongoing improvements in the broader economyand the jobs market. We are projecting overall economic growth tobe 2.4% in 2014 and 2.7% in 2015, supported mainly by increases inconsumer spending and residential fixed investment,” Brinkmannsaid.

“GDP growth will remain relatively weak through the end of 2013and early 2014, at around 2%, due to a variety of uncertainties,particularly over US spending and tax policies linked to the debtlimit debate. Our expectation is that the economy will growsomewhat faster in the second half of 2014 as some of these issuesare resolved,” the MBA economist said.