Expectations of lower interest rates next year to fuel a cooling economy could reduce borrowing costs and entice more consumers to buy big-ticket items such as homes.

        That at least is the hope of mortgage lenders and housing observers. The Federal Reserve could cut interest rates late this month to spark consumer spending, a move that could result in an increase in home sales and mortgage originations.

        Industry experts predict that the average interest rate nationally for a 30-year, fixed-rate mortgage in 2001 will be 7.5 percent, down from the average rate of 8.1 percent anticipated for 2000.

        Economists from the Mortgage Bankers Association of America and National Association of Realtors predict that the Fed could lower rates twice by June to spur spending and refuel the economy.

        Such moves would not only be good news for potential home buyers, but also for the mortgage lending and housing industries.

        The possibility of lower rates is expected to boost U.S. mortgage volume to $1.16 trillion next year, up from a revised rate of $980 million for 2001, before expectations that the Fed might have to cut sooner than later help strengthen the economy.

        “We revised our estimates because we think the Fed will take some action next year to spark the economy,” said Doug Duncan, chief economist at MBA.

        That action also is expected to help the nation's housing market, both for consumers looking to buy homes or those refinancing existing ones.

        Existing-home sales nationally next year are expected to hit a seasonally adjusted annual rate of 4.94 million, down from 5.01 million expected for this year, said Walt Molony, spokesman for National Association of Realtors. Still, the prediction for 2001 would mark the third-best year ever for existing-home sales.

        He projected that home sales next year could be strong as:

        • Lower interest rates make more homes affordable for first-time home buyers as borrowing costs drop.

        • More existing homeowners move up to more expensive homes, taking advantage of lower rates.

Are we headed for a recession?
  • Manufacturing: Excess inventory a danger
  • Wall Street: Not all stocks off
  Interest rates: Housing market may stay strong
  • Retail sales: Falling confidence could curtail spending
  • Media: Newspapers most vulnerable to downturn
  • Transportation: Trucks, airlines may feel pinch
Online shoppers asked to pay tax
Delta fliers in rebellion
Intel debuts portable MP3 player
Power deal haunts some Calif. firms