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HOME INTEREST RATES, NEARING 9%, STILL COMPETITIVE

Mortgage rates approaching 9 percent are attractive from a historical perspective, but they don't look so good to many of today's homebuyers who fondly remember the lower rates that prevailed last year.

On average, you can get a 30-year, fixed-rate mortgage now for an interest rate of about 8.6 percent and as low as 8.25 percent if you pay more points. But in 1993 the going rate for much of the year was 7 percent or less.The predictable result of this rise has been a slowdown in home buying, particularly among those who might have considered a move up but are reluctant to part with the low-cost mortgages they have now.

"Rates are still competitive," said broker George Smith of HER Realtors in Columbus, Ohio. "But those who refinanced at 6.5 percent are not going to buy at 8.5 percent now."

John Pfister, market research manager of Chicago Title and Trust, argues that potential buyers shouldn't let the psychological shock of higher rates influence what ought to be a dollars-and-cents decision.

"It's important to remember that though rates have been rising, they are still at the lowest levels they've been in years," he said. "Most who have been considering a home purchase can still feel comfortable about doing so now."

Pfister notes that even if mortgage rates fall next year - and there are no guarantees of that - modest inflation in home prices can wipe out any savings you'd get by waiting for the lower rates.

For example, suppose you find a house priced at $150,000 and anticipate that after you sell your current home you'll have $50,000 for a down payment. That would leave a mortgage of $100,000.

With a 30-year mortgage at 8.25 percent interest, the monthly principal and interest payments would be $751. If the interest rate fell another quarter point to 8 percent, the payment would decline to $733.

But "if the selling price rose 2 percent - not a major jump in an interest-rate-driven seller's market - the payment rises from $733 to $755, despite the quarter drop in the interest rate," Pfister says.

"So in spite of a quarter-point drop in mortgage rates, home price inflation results in average monthly payment going up."