The Mortgage Bankers Association on Tuesday said it expects residential mortgage originations to drop 32% next year, to $1.2 trillion, due to a continued decline in refinancing activity.

The trade group estimates that refinances will drop 57% from 2013, to $463 billion, as interest rates continue to rise. It predicts that mortgage rates will rise above 5% in 2014 and to 5.3% by the end of 2015.

Purchase activity is expected to increase, however. The trade group estimates that home purchases will rise 9% next year, to $723 billion.

"Our forecast for the increase in the purchase market is based on our expectations for ongoing improvements in the broader economy and the jobs market," Jay Brinkmann, the MBA's chief economist and senior vice president for research and education, said in a press release.

The MBA revised its forecast for residential originations this year to $1.7 trillion, up from $1.6 trillion, to reflect what it called "shifts in lender market shares" reported in the latest Home Mortgage Disclosure Act data release.

Rising home prices this year will allow more borrowers to tap the equity in their homes though consumers are more likely to take out a home equity line of credit to do so rather than refinance, Brinkmann said.

In 2015, the MBA is forecasting that mortgage volume will remain at around $1.2 trillion, with home purchase volume rising to $796 billion and refinances dropping further, to $433 billion.

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