The Mortgage Bankers Association of America this week raised its forecast for 2003 loan volume 31 percent, to $2.6 trillion, as low interest rates spur another wave of refinancings by homeowners.

The amount of loans made would be a record and above a preliminary estimate of $1.98 trillion, said Phil Colling, an economist with the Washington-based trade group. A record $2.46 trillion was lent in 2002.

The group's official forecast will be released later this week, Colling said.

Housing has helped sustain the U.S. economy through home price increases and refinancings, allowing consumers to extract $680 billion in equity to spend in 2002, according to the Federal Reserve.

"No one would have predicted at the end of last year that mortgage rates would drop as low as they have," Colling said.

"Just before the beginning of the war in Iraq we saw rates set new records."

The revised forecast comes three weeks after the trade group's index measuring refinancing activity set a record of 9387, up from 4549 the last week of 2002.

Mortgage rates will probably average 5.8 percent this year and 6.1 percent in 2004, compared with 6.6 percent in 2002, according to Freddie Mac, the second-largest mortgage buyer after Fannie Mae.

The National Association of Realtors has also boosted its forecast, and now expects home sales this year to fall 1.3 percent to 6.46 million, compared with a month-ago estimate of a 1.5 percent decline. In January, the Washington-based trade group had estimated the market would drop 3.8 percent.

Existing home sales will probably fall 0.7 percent, to 5.53 million, and new-home sales are forecast to fall 4.7 percent, to 928,000 homes, said David Lereah, chief economist with the National Association of Realtors.

Last month the trade group forecast a 1.3 percent drop in existing home sales and a 3.1 percent drop in new-home sales.