MORTGAGE RATE UP TO 7.20% COOLING OF VALLEY HOME SALES UNLIKELY.

Byline: Gregory J. Wilcox Staff Writer

Mortgage rates have been rising for three weeks and are expected to go higher but it probably won't cool the hot San Fernando Valley residential real estate market, experts said Wednesday.

By last Friday the average weekly interest on a 30-year fixed mortgage in the Los Angeles area had jumped to 7.20 percent from 6.90 percent Feb. 22, according to Butler, N.J.-based HSH Associates, which conducts the nation's largest survey of mortgage pricing.

``It's not as though rates jumped up from record low levels. Rates are definitely on the increase but you're not getting a panic reaction,'' said Keith T. Gumbinger, HSH's vice president.

However, rates are still below this year's local high of 7.46 percent for the week ending Jan. 4.

``We're not desperate by any means. Rates have increased a little but we're not in dire straits and buyers aren't running and screaming to lenders to get a loan,'' he said.

Home loan rates are most closely tied to the 10-year Treasury bond.

Gumbinger noted in his most recent weekly analysis that the rates increased again last week because bond traders readjusted positions to take into account new growth in the economy and prospects for an additional upswing in activity in the months ahead.

In other words, a stronger economy could mean higher home loan rates.

But he also cautioned borrowers to remember that rates sank to record lows last year and that rates in the low 7 percent range are common and quite comfortable.

Since early 1999, average rates below 7 percent have totaled only 15 weeks, Gumbinger said.

Realtor Tom Carnahan, president of Carnahan & Associates in Woodland Hills, said some potential buyers are getting anxious and locking in rates as a hedge against future increases.

This can involve paying a fee to the lender, depending on the length of the lock-in period.

It might be a good option, especially if the home purchase involves a 45- or 60-day escrow, Carnahan said.

``It's a gamble. Some people are comfortable with saying let's roll the dice and see what happens over the next three or four weeks,'' he said. ``Most people are more conservative than gamblers, therefore we are starting to see more lock-ins.''

However, the rising rates don't seem to be pushing anyone out of the market at this time.

Buyers not comfortable with a rate over 7 percent can find lots of loan products with adjustable rates in the low 6 to high 5 percent range.

North Hollywood-based Allwest Mortgage specializes in the purchase market and business is still brisk, said company President Philip E. Lipp.

Buyers now seem more interested in getting information about locking in rates than actually doing it.

``So far I haven't seen (rising rates) have an effect on purchases falling out of escrow, and I don't suspect that's really going to happen until we see rates start to push over 8 percent,'' Lipp said.

And Countrywide Home Loans, the nation's biggest mortgage company, has a product that lets buyers lock-in a rate for a specific period of time.

This latest uptick appears to have a neutral effect on buying habits, at least from Countrywide's perspective.

``People were buying homes at the same pace in a 6 percent market as they are in a higher market,'' said Don Rector, a first vice president at the Calabasas-based company.

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RATES ON THE RISE

Interest rates on a 30-year fixed mortgage have been rising since Feb. 22 but are still below the year's high reached in early January.

SOURCE: HSH Associates

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