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Economist's View : Payments Seen Rising on Adjustable Loans

October 18, 1987|DAVID W. MYERS

The continued upward trend in interest rates will undoubtedly make it tougher for first-time buyers to qualify for a loan, but the rudest surprises could be in store for people holding adjustable-rate mortgages.

"Rates have basically been dropping for four years, and now they're going back up," said Joel Singer, California Assn. of Realtors chief economist, who wrapped up CAR's annual convention with a series of executive meetings in San Diego last week.

"A lot of people who bought their homes three or four years ago are going to see their payments go up for the first time since they moved in."

Meanwhile, the recent hike in the prime rate--to 9% from 8 3/4%--is particularly bad news for homeowners who have taken out home-equity loans. Rates on many of those loans are linked to movements in the prime.

Although those borrowers' payments won't go up, the loans will take longer to pay off because more money will go toward interest instead of principal.

The estimated 19 million consumers who have variable-rate credit cards will probably see their rates rise, too, although the interest rate they pay will likely remain below the 19%-plus rate charged by many lenders.

CAR has begun marketing 20 two-hour cassette tapes, each of which qualifies licensees for three hours of so-called continuing education credit.

The state's continuing-education law requires that all licensees take the equivalent of 45 hours of college-level real estate courses before they can renew their license. Jerry Donner, a CAR vice president, says the Department of Real Estate approved the two-hour tapes for three full hours of credit because "we were able to squeeze everything you'd get in a three-hour course into a 117-minute tape."

Donner figures the tapes will have wide appeal, especially for realtors who can play the tapes in their cars or sales agents in outlying areas where few "live" continuing-education courses are offered. The tapes, which can also can be purchased by the general public, are available through most local boards of realtors and CAR's Los Angeles headquarters.

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