WHEN IT COMES TO MORTGAGES, OLD HABITS AREN'T DEAD.

Byline: GREGORY J. WILCOX

The ``Greenspan Effect'' roiled the residential real estate market.

Home buyers today are increasingly favoring an old option when selecting a mortgage: the 30-year fixed rate loan.

``Just a year ago the loan that was popular was the five-year fixed,'' said Joe Parisi, senior loan consultant at Metrocities Mortgage LLC in Sherman Oaks.

He's referring to a loan with a fixed interest rate for five years and then adjusts every year thereafter.

It was attractive then because the interest rate on the adjustable portion was far enough below the rate on a traditional 30-year loan that buyers could save enough on their monthly payment to either make the purchase affordable or get more house for their money. So were rates on other adjustable products.

It was a good bet then. Buyers banked on the fact their home would appreciate and they could either sell it and move up before the adjustment period or refinance into a fixed rate product.

Hindsight says that was a good gamble. If someone bought a home in the San Fernando Valley priced at the median of $489,000 using the hybrid product in July 2004, they made a $111,000 return on that investment during the ensuing 12 months.

That might not be the case today, though. The 30-year fixed rate is not much higher than the five- or one-year adjustable rates. So more and more buyers are opting for a 30-year loan now, Parisi said.

On Friday he worked up the following options for buying a Valley house priced at the median $600,000 with that day's current rates and a 10 percent down payment.

--The buyer would typically take a 30-year loan with a 5.875 percent rate on $480,000 and finance the balance with a second mortgage at a slightly higher rate. The total monthly payments work out to $2,675.

--The five-year hybrid has the interest fixed at 5.25 percent for five years, then is pegged at the current rate for a one-year adjustable. The monthly payment is $2,425. Buyers who plan to stay in their home for more than five years might not want to gamble on how high rates may go.

--For a one-year adjustable the interest rate would be 5.75 percent and the monthly payment would be $2,625.

``That's not really an option any more,'' Parisi said.

That's the ``Greenspan Effect.'' Federal Reserve Board Chairman Alan Greenspan has been steadily boosting the federal funds rate by a quarter percentage point since last summer. That, in turn, cranks up adjustable home loan rates.

Long-term rates are keyed to the 10-year Treasury bill and that environment has been keeping those low.

Consumers are paying attention.

The latest survey by the Mortgage Bankers Association found that the adjustable-rate mortgage share of activity decreased to 28.1 percent of total home loan applications for the week ending Aug. 19, down from 28.9 percent the previous week. And it's off this year's peak of a 36.6 percent share the week ending March 25.

``Today, when all costs are added in, it is more expensive than a 30-year fixed rate loan,'' said Amy Crews Cutts, deputy chief economist at mortgage giant Freddie Mac.

Of course there is the teaser rate loan that offers 1 percent. But Parisi points out that's the rate for the first month. The actual rate is 5.374 percent.

Buyers have a choice. On that $600,000 house they can pay $1,869 for a month, or a year. Including all the interest, the payment would be $2,475.

If they take the lower option, called a negative amortization, money is added to the back end of the loan.

And that might not be that good of an adjustment when this market, and interest rate, head of on their next course.

Gregory J. Wilcox, [phone]

greg.wilcox(at)dailynews.com