HOME LOAN RATES TOP 8%.

Byline: Deborah Adamson Staff Writer

Potential home buyers who have dilly-dallied in the last few months might be caught off guard this week by some of the highest mortgage rates in more than two years.

The national average for 30-year, fixed-rate mortgages on conforming loans has risen past 8 percent this week, the highest level since May 1997, according to HSH Associates, a financial publisher in Butler, N.J.

``It's am important psychological threshold,'' said Keith Gumbinger, HSH vice president. Many will say, ``Gee, what happened? I missed my chance,'' he predicted.

On Tuesday, the average interest rate for a 30-year fixed mortgage stood at 8.07 percent nationally. It has been a fast climb since April, when rates hovered around 7 percent. Rates reached a two-year low of 6.85 percent last September.

California's average rates have risen along with the nation's, but stayed slightly lower. On Friday, the average rate in California stood at 7.84 percent compared with 7.93 percent for the nation. This week's statewide average hasn't been calculated yet, Gumbinger said.

Higher rates hit potential home buyers right on their bottom line. A $100,000 mortgage loan at 7.5 percent would cost a borrower $699 a month, according to Philip Lipp, president of North Hollywood mortgage broker Allwest Mortgage. That same loan would cost $734 a month at 8 percent, or an extra $420 a year.

A $200,000 loan costs $1,398 a month at at 7.5 percent but $1,467 monthly at 8 percent, or $828 more each year.

The suddenly higher rates are expected to cool down what has been a white-hot housing market. In June, sales of single-family homes jumped 10.6 percent to a record 5.5 million homes nationwide. Gumbinger speculated that many of those sales were from fence-sitters, people who felt pushed into buying before rates rose still higher.

Brian Carey, regional economist at the Mortgage Bankers Association of America in Washington, predicted home sales will slow down as rates go up. He said that for every 1 percent increase in rates, sales usually decline by about 450,000 homes.

Higher rates already have killed off the refinancing business.

Refinancing business has declined by 50 percent at Calabasas-based Countrywide Home Loans, the nation's largest independent mortgage lender, said spokesman Stephen Brandt.

Lipp said refinancing activity at his North Hollywood brokerage has dropped off completely in the past few months.

``Refinancings have suffered,'' Lipp said.

Nationally, there also has been a move toward adjustable rate mortgages. Gumbinger said 22 percent of all mortgages in June incorporate some form of adjustable rates. In March, the figure was 11 percent.

Brandt, senior vice president for consumer markets at Countrywide, said customers have been increasingly asking and applying for hybrid products that blend fixed and adjustable rates.

Officials at Countrywide and Allwest haven't noticed a slowdown in home sales, however. Lipp doesn't expect the 8 percent rate to hurt the housing market considerably.

``People will still buy, whether it's 7.25, 7.5 or 7.75,'' he said. ``If the (rising rate) trend continues, it will slow sales, but it won't stop sales.''

Indeed, many see the 8 percent rate as reasonable in the context of the past few years.

The average 30-year fixed rate for the past five years has ranged from 6.5 percent to 9 percent, Carey said. And in the past decade, the average interest rate for a 30-year fixed mortgage was 9.2 percent, according to Norwest Mortgage, a unit of Wells Fargo & Co.

Carey believes 8 percent is a reasonable interest rate, even though it's higher than recently completed loans. A rate of 7 percent or less tends to spur home sales while 9 percent or more puts a dent in them, and 8 percent affects some potential home sales but not many.

Why are rates increasing? Long-term mortgage rates generally reflect the movement of the 10-year Treasury note, Carey said. They track each other's movements because they compete in the same investment market. Investors looking for a safe yield generally buy either Treasury notes or mortgage-backed securities.

But threats of higher inflation - most notably last week's higher-than-expected showing of the Employment Cost Index - have prompted fears the Federal Reserve Board will raise interest rates. That, in turn, has driven up the price of Treasury notes.