Mortgage lenders are bracing for a sea change in the market, with demand for refinancing expected to dwindle and home sales to recede from last year's high-water mark.

Nineteen ninety-eight was a record year for the mortgage sector, thanks to declining interest rates, which led to a surge in home sales and refinancing. The Mortgage Bankers Association estimates loan volume for the year at $1.4 trillion, 50% of it to help customers lock in lower rates. The association is predicting that refinancing will account for only 38% in 2000.

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