The Mortgage Bankers Association on Tuesday upwardly revised its forecast for residential origination this year to $1.7 trillion, citing low interest rates that have sparked a massive refinance boom. But it now expects slightly lower volume of $1.3 trillion next year as refinances fall in half.

The higher projection for this year is due almost entirely to low interest rates and government programs helping underwater borrowers refinance, Jay Brinkmann, the MBA's chief economist, said in a news release.

In May, the MBA's forecast that mortgage volume would hit $1.28 trillion this year. Going forward the mix of mortgages is expected to shift dramatically, though refinances will still dominate.

The trade group says refinances will make up $785 billion in activity in 2013, down from a revised estimate of $1.2 trillion in 2012. Home purchases will climb to $585 billion in 2013, up from a revised estimate of $503 billion for 2012

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