By KAREN SPILLER, Telegraph Staff

Published: Saturday, Mar. 26, 2005

NASHUA - When Topsell Realty agent Denise Barry bought her home in 1987, the interest rate on her mortgage was 12.5 percent.

With those rates at historic lows in recent years, Barry has seen that figure cut by more than half.

But rates are creeping back up, as the Federal Reserve pursues a campaign of gradually raising rates to stem the effects of inflation.

On Thursday, interest rates on 30-year, fixed-rate mortgages topped 6 percent, the highest rate in eight months.

While some speculate the housing market could finally slow, Barry doesn’t expect the rate hike to affect her business as she enters the busy spring home-selling season.

“Six percent is nothing,” Barry said. “It’s still a bargain.”

Larry Weinberg, senior mortgage consultant at 1st New England Mortgage in Nashua, agreed.

“The rates are still well within the reach of most people,” he said.

The national rate on a 30-year, fixed mortgage is 6.01 percent, up from 5.95 percent last week. Rates for 15-year fixed mortgages are at 5.56 percent, from 5.47 percent the prior week.

The Fed’s Open Market Committee, which has been raising the key federal funds rate in quarter-point increments since June, is expected to raise rates again on May 3.Dean Chrison, deputy director of the New Hampshire Housing Finance Authority, said that if rates go up enough, it will have a dampening effect on the housing market.

“If rates continue to trend up, you’ll see more of a flattening in prices,” Christon said. “It doesn’t necessarily mean sales will drop off dramatically or the prices will drop. It does mean the rate of appreciation will slow down.”

With even slightly lower rates, Weinberg predicts people will lower their sales prices, as would-be buyers have a harder time qualifying for mortgages.

“The prices have been inflated over the past few years,” he said.

After being busy for several years straight, Weinberg has been expecting interest rates to go up for the last couple of years. And the rise will cut down on the number of refinances he does.

“Our bosses have been telling us all along, you’ve got to cultivate your business, because these refis aren’t going to last forever,” Weinberg said.

Kathleen Tousignant, loan officer at Triangle Credit Union, said many members are concerned about the rising mortgage rates. But it hasn’t slowed anyone down as far as refinancing or even taking out home equity loans, she said.

“I think we’re getting busier than we have been in the past couple of months,” Tousignant said. “Those who were waiting to see if rates would go down are coming in and saying, ‘We ought to do something, based on what we’re hearing.’ ”

Some 60 percent of the mortgages Tousignant is writing now are home equity lines, she said. “I do have people asking me if we have a fixed rate home equity line, but at this time, we don’t. But it’s still not stopping them from taking it.”

Pam Ford, vice president of lending at Triangle, said mortgage financing didn’t slow down the last time there was an increase in the rates, either.

With a shortage of housing in New Hampshire, the Housing Authority’s Chrison said there’s pressure for people to buy. Purchase prices, on average, have been going up between 9 and 11 percent over the past year, According to the Housing Authority’s latest data.

To qualified applicant, the authority is offering 5.4 percent with 2 points for a 30-year mortgage; 5.9 percent with no points for 30 years; and 6.5 percent for 30 years with 0 points, which includes a grant of up to 4 percent of the selling price to use for closing costs. Eligible homebuyers must have incomes with certain guidelines and purchase a house within price limits.

And those who do buy will see prices hitting highs not seen in years.

“I sold a house six years ago for $139,000,” Weinberg said. “There’s a 1,000-square-foot ranch in the same area for $294,000 today. I told my wife this last night, and she said we gave our house away.”

Relatively low interest rates have helped bring people into the market - especially young people, many of whom purchase condominiums as their first home.

While two-bedroom garden-style condos more than 10 years old are selling in the $130,000 range, Barry of Topsell said she has listed 45 brand-new “workforce” condos on Harbor Avenue. They start at $139,000 for a 611-square-foot one-bedroom condo and go up to the $180,000s for a 1,100-square-foot three-bedroom unit, she said.

Based on the current interest rate and what people are paying for rent in Nashua, Barry said prices are still very affordable.

“Instead of paying $1,200 in rent,” she said, “for another hundred or $200 a month, you can own your own place.”
Karen Spiller can be reached at 594-6446 or .