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To: Giordano Bruno who wrote (254930)	8/11/2003 7:23:08 AM
From: Giordano Bruno	Read Replies (1) \| Respond to of 436258

Home-Equity Loans Are Rising, As Higher Rates Slow Refinancings By JULIE HAVIV DOW JONES NEWSWIRES NEW YORK -- The sharp rise in home-mortgage rates has put a stop to the refinancing boom in recent weeks, raising the specter that consumer spending could slow. But demand is rising for home-equity loans -- another way consumers use their homes to raise cash at favorable terms. "We are really seeing a strong uptick in demand" for home-equity lines of credit, said Bob Walters, chief economist for Quicken Loans. Quicken, one of the nation's largest online mortgage lenders, says it has seen a 35% increase in home-equity lines of credit. Over the past two months, mortgage rates have soared from their strikingly low levels. Freddie Mac's 30-year fixed mortgage rate now is at an average of 6.34%, which is 1.08 percentage points higher than its record low hit two months ago. The average for 15-year fixed-rate mortgages was 5.66%, a full percentage point more than its record low in early June. This surge in mortgage rates has damped interest in home-refinancing. The latest refinancing index from the Mortgage Bankers Association showed a 2.4% drop to 4047.5 -- down by more than 50% from its record of 9977.8 set at the end of May. "Mortgage refinancings are a crutch for consumer spending that allowed household expenditures to grow amid shrinking payrolls," said John Lonski, chief economist at Moody's Investors Service. As a result, home-equity credit lines "now offer another means of financing consumer spending," Mr. Lonski said. The nation's largest mortgage and home-equity lender, Wells Fargo Bank, also is noticing interest for such credit lines. "As interest rates are moving up and refinancing slowing, we're finding that borrowers are still interested in tapping into the equity of their homes," said Colin Walsh, division head and executive vice president of Wells Fargo Bank's Equity Direct, which is within its consumer-credit group. For borrowers with a good credit history, Quicken offers such credit lines at rates as low as 0.05 percentage point below the current prime rate of 4%. In general, it offers such credit lines with rates between 4% and 5%. A benefit to home-equity credit lines is that interest payments are tax-deductible. Of course, should short-term interest rates rise, the prime rate will go up, and that will mean rising interest costs on such loans, which will damp demand.