Feverish activity in home refinancing and buying, stimulated by fixed mortgage rates below 10%, may be headed for a slowdown. The rates last week were, in many places, on the rise.
Fixed mortgage rates had dipped to single digits in March, the lowest in nearly eight years.
"They are starting to edge back up," said Lisa Worthington, a spokeswoman for Wells Fargo Bank in Los Angeles. On May 9, Wells Fargo had a 30-year fixed rate of about 10%, but by last Wednesday, it had risen to 10.25%, which would amount to a $19 jump in the monthly payment on a $100,000 house, from $877.57 to $896.10.
Grace Wickersham, vice president and chief economist at Glendale Federal Savings & Loan, agreed with Worthington, saying she believes that there will be "upward pressure" on fixed mortgage rates, which are now "probably at the low end of the spectrum."
HSH Associates of Riverdale, N. J., conducted a survey of 2,000 lenders nationwide, which revealed that home mortgage rates in most parts of the country were slightly up again last week as the national average 30-year fixed-rate mortgage left the single-digit range.
And Duane Keene, vice president and regional manager of Bank of America in Los Angeles, said, "They (the rates) have inched up in the past couple of weeks at our bank, and it's my sense that ours are where the market is--hovering around 10%."
Not All Rates Rose
He was quick to point out, however, that not all of the bank's mortgage rates increased, saying, "The price of adjustable-rate loans did not go up, only the price on some of our fixed loans. The rate on homes costing up to $133,250 did not change.
" The rates for homes costing more than $133,250 went up. It (the difference) has to do with the size of the loan and (the fact that) Fannie Mae buys our conforming loans (those up to $133,250)."
Why any rate hikes? Keene suggested that the "seasonality" of home buying might be a factor.
"Until a few weeks ago, most of the transactions were for refinancing, but the purchase business runs from about May 1 until the end of September, and we're beginning to see an increase (in home sales)," he explained. "It would not be uncommon to see a little bit of upward movement (in mortgage rates) because of this increased demand."
This would apply more to resales than to new housing, because developers usually obtain financing commitments for their projects.
Homes in escrow probably would not be affected anyway. As Worthington put it, "When the customer says, 'Draw up the documents,' that's when the rate is set, unless the rate goes down. Then the customer has the option of paying the agreed rate or paying the lower one plus a fee to have the documents redrawn."
Rate increases may or may not apply to refinancing, which normally costs slightly more than original loans. Luke Hayden, a senior vice president with 1st Interstate Mortgage Co. in Pasadena, said that people who are refinancing their properties "can lock in the rate by paying a fee, so refinancing can be protected."
Fixed mortgage rates at 1st Interstate are also up "a good %," he said, "from our low of 9 5/8%, and they inched up during the past several weeks, because of a lot of factors. Among them: the price of oil, supply and demand in the credit markets and the exchange rate of the dollar."
However, Mary Schaubert, a spokeswoman for Sears Savings Bank in Glendale, doesn't expect the rate, which at her bank was 10.56% for conforming loans last week, to change more than % up or down through the summer, and Paul Himmelberger, branch manager for Beverly Hills Savings & Loan in La Jolla forecast a "softening in the interest rate" for his institution, which gets Freddie Mac to buy its loans.
"We're pretty much guided by Freddie Mac's net yields," he said, and last Wednesday, Freddie Mac experienced what Himmelberger termed "the largest reduction in its net yields since April 29." Contributing to this story were Times writers David M. Kinchen and Evelyn De Wolfe.