RATES UP? DEAL WITH IT MORTGAGE LENDERS SAY INCREASES WON'T LAST.

Byline: Ben Sullivan Daily News Staff Writer

While last week's spike in mortgage rates caught many would-be borrowers off-guard, lenders and brokers have offered a blunt retort: Deal with it.

``People have gotten a little greedy,'' said Ron Fleishman, vice president of The Mortgage House Inc., a Woodland Hills-based direct lender. Even with recent rate increases, ``We're still at historic lows. If people were thinking of purchasing, I'd still purchase.''

Besides, he and others said, the new higher rates won't last.

Until late last week, the cost of a loan to either buy a home or refinance an existing mortgage had been dropping in fits and starts for months. That was largely because an increasingly strong dollar pushed U.S. Treasury bond prices up, forcing their yields down. Mortgage rates, which are pegged to 30-year bond yields, likewise fell.

Then last week, to the relief of the International Monetary Fund but the consternation of dollar-lovers everywhere, beleaguered Japan began finally to take action on its limp economy. Tokyo announced plans to take over or close failing banks and to pump money into healthier banks to encourage them to lend money to the public again.

Though not in place, mere news of the proposed steps bolstered international confidence in the Japanese yen, at the expense of the dollar. The U.S. currency staged its worst one-day fall against the yen in a quarter century Thursday, spurring investors to pull out of dollar-denominated investments, particularly U.S. Treasury bonds.

As a result, the price of bonds plummeted, pushing their yields up sharply, from a 30-year low of 4.71 percent at the start of last week to 5.12 percent at the close of trading Friday. Mortgage rates zoomed.

At the nation's largest residential loan broker, Calabasas-based Countrywide Home Loans Inc., the rate on a 30-year fixed-rate loan leapt from 6-1/4 percent with 1-1/2 points on Tuesday to 7 percent with 2-1/8 points on Friday. Norwest Mortgage Inc. and other lenders similarly boosted their rates, with the average 30-year fixed-rate loan expected to rise to 6.95 percent this week, from 6.7 percent last week.

So far, at least, realtors say they have seen little reaction to the news by shoppers.

``It's not even a concern,'' Bud Mauro, president of the Southland Regional Association of Realtors, said Monday. ``We're still running very low on inventory, and there are a lot of buyers out there.''

And over the long haul, lenders say they expect rates to fall back, rebounding from what Fleishman described as an ``overreaction to Japan.''

James Johnson, chief executive of Fannie Mae, the largest U.S. buyer of home mortgages, said he expects rates to fall back at the latest by early next year. ``I don't think we're seeing a real run-up in interest rates that's going to last for a period of time,'' Johnson said. ``The best for our bottom line is steady rates, which is what we're going to have.''

Still, that sort of bluster is little comfort to people who have recently bought homes but whose rates haven't been locked in.

Ross Goldberg, an executive at Blue Shield of California in Woodland Hills, will find out today whether the rate on his new Westlake Village house will increase a little, a lot or not at all.

``People plan what home they can afford and what kind of life they can afford based on their mortgage payment,'' Goldberg said. ``It's frustrating to have something that affects my life so much totally out of my control.''