The Mortgage Bankers Association expects home loan originations to fall to their lowest level in a decade this year, as higher interest rates dampen demand for refinancings.

Total industry volume will drop 40%, to $1.28 trillion, the trade group said Tuesday.

That would be a sharper drop than in the MBA forecast a month ago, and the industry's worst showing since 2000, when it produced $1.14 trillion of mortgages.

Refis alone should fall more than 60%, to $502 billion this year, the trade group said.

"We expect that has largely been choked off … with the increase in rates in December," Jay Brinkmann, the MBA's chief economist, said at a press conference. According to Freddie Mac, the average 30-year fixed mortgage rate climbed to 5.09% last week, from 4.88% in November.

Originations of loans to homebuyers, however, will climb 5%, to $776 billion this year, the MBA said.

In early December, the MBA had projected overall loan production would drop 24% this year, to $1.5 trillion, roughly the same volume as in 2008. (At the time it issued that forecast, the MBA pegged 2009 originations at $1.97 trillion; it has since raised that estimate to $2.11 trillion. The MBA has not yet finalized its tally for last year.)

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