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UPDATE 1-U.S. mortgage supply seen falling in 2018 - MBA

(Adds quote, details on loan forecasts)

NEW YORK, Oct 24 (Reuters) - U.S. lenders are expected to issue a smaller amount of mortgages in 2018 on a sharp drop in refinancing demand, but loan originations will pick up in 2019, the Mortgage Bankers Association said on Tuesday.

Total mortgage originations are forecast to decline to $1.60 trillion next year, lower than an expected $1.69 trillion this year, the Washington-based industry group said.

Loan volume would rebound to $1.64 trillion in 2019, it said.

The amount of new loans to refinance a home was expected to drop to $430 billion, down 28.3 percent from 2017, while the amount of new mortgages to buy a home will likely increase by 7.3 percent to $1.2 trillion, MBA said.

For 2019, MBA forecast purchase loan volume to total $1.24 trillion and refinancing volume to fall again at $395 billion.

"The housing market has been hamstrung by insufficient supply, with inventories of homes remarkably low given the home price growth we have experienced," MBA's chief economist Michael Fratantoni said in a statement.

"The job market remains strong, demographic trends are quite favorable, mortgage credit is becoming more available to qualified borrowers, and home prices should continue to rise," he added.

Home borrowing costs will likely rise as the Federal Reserve may raise interest rates three times next year and twice in 2019, but they would remain near the low end of their historical range, according to Fratantoni.

The benchmark 10-year Treasury yield should stay below 3 percent by the end of 2018, while the interest rates on 30-year fixed-rate mortgages will likely hold below 5 percent, he said. (Reporting by Richard Leong; Editing by Chizu Nomiyama and Tom Brown)