WASHINGTON — Fixed-mortgage rates are expected to rise to about 6.5 percent by the end of 2007, and sales of both new and existing homes are expected to slide this year, the Mortgage Bankers Association said yesterday.

In an economic forecast, the trade group estimated declines in 2007 of 7 percent in existing-home sales and 8 percent in new-home sales.

Over the past year, existing-home sales have fallen by 10.7 percent, according to the National Association of Realtors. Meanwhile, sales of new homes have fallen 15.3 percent over the past 12 months, according to government data.

However, the housing market is set to stabilize in the months ahead, said MBA's chief economist.

"We believe that the housing slowdown will have dissipated by mid-year," economist Doug Duncan told reporters.

The mortgage bankers' group said sales of both types of home should bounce back by 3 percent in 2008 and by 1 percent in 2009.

Total residential-mortgage production in 2007, meanwhile, will be $2.39 trillion, down 5 percent from 2006. Originations should fall 4 percent in 2008 and 6 percent in 2009, MBA said.

Borrowing costs for 30-year fixed-rate mortgages are currently averaging 6.13 percent, according to MBA.

Kurt Pfotenhauer, the group's senior vice president for government affairs, said in a statement that the bankers' association will press lawmakers and the White House in the year ahead to reform government-sponsored mortgage companies Fannie Mae and Freddie Mac, reauthorize terrorism-risk insurance and set a new standard for combating predatory lending.

Pfotenhauer said during a press briefing the group is "encouraged" that new House Financial Services Committee Chairman Barney Frank, D-Mass., has made predatory lending one of his top legislative priorities.

Lawmakers came close to passing a bill overhauling rules on Fannie and Freddie before the November congressional elections, but weren't able to hammer out a compromise. The bankers' group said it's pushing for an independent regulator for the companies that will set affordable housing goals and ensure a competitive secondary mortgage market.