MUTATION AND ADAPTATION IN ACTION:

Thinking long-term: As variable rates rise, more owners play it safe by refinancing into 30-year fixed loans. (Todd Stein, October 9, 2005, LA Times)

Like thousands of other Southlanders who've seen the interest-rate writing on the wall, Rodriguez rolled her equity line and her first mortgage into a new, 5.75% fixed-rate 30-year loan for $550,000, saving $500 a month on payments and turning an uncertain future into a secure one.

"Now, instead of worrying about how I'm ever going to pay off $155,000, when all I'm paying is interest, I'm planning on having my mortgage close to being paid off when I'm" retired, Rodriguez said.

Thanks to an unusual combination of a strong bond market and the Fed's inflation-prevention measures, long-term rates are holding steady at historic lows while short-term rates rise.

"This is one of the first times we've experienced long-term rates not moving at the same pace as short-term rates," said Karen Crosby, a mortgage broker with Sherman Oaks-based Metrocities Mortgage. "What we're seeing is it's an opportune time for people who are overextended to bail themselves out."

The number of homeowners seeking to refinance their equity lines into new fixed-rate mortgages has risen significantly, several area mortgage brokerage firms report, although none tracks that data. Allen Bond, president of Palos Verdes Funding Group, said the calls started pouring in after short-term rates hit 6% in January.

"I think most people recognize that the short-term rates are going to continue to rise and fixed rates are still pretty darn good," said Bond, who is also a director of the California Assn. of Mortgage Brokers. "They want to lock in some security."

Wow, you mean consumers react to changing economic conditions? Why didn't Adam Smith think of that?

Posted by Orrin Judd at October 9, 2005 9:42 AM