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If there's one constant in the mortgage business, it's that there is no such thing as long-term stability. Rates go up and rates go down, but rarely do they stay in one place more than a few days.

And right now interest rates are heading down -- substantially.

Over the last 11 weeks, the local market has seen mortgage rates for 30-year home loans drop more than one-half a percentage point. At the end of business last Friday, you didn't have to break a sweat to find mortgage makers eager to offer 7.78percent loans with no points or up-front interest charged. In case you're rubbing your eyes, that was 7.78 percent -- well under 8 percent, the lowest average local mortgage rate since 7.76 percent 17 months ago.

One-year adjustable-rate mortgages, while falling, haven't dropped as far as their fixed-rate brethren. Still, a 6 percent adjustable is nothing to turn your back on.

Statewide and across the fertile plains, the figures are even more impressive. Why, you may ask? Two reasons, say industry experts: the "thud" and the "hum."

First, the "thud." That noise is the sound of inflation, which consistently is hitting the floor. Just last week, the federal government reported that inflation in June rose just 0.1 percent, and that for the first six months of the year it's climbed 1.4 percent -- the best first half of any year since 1986.

"There is no inflation, virtually none, and that is helping to keep investor yields down," said Keith Gumbinger, a spokesperson for HSH Associates of Butler, N.J., which tracks the mortgage industry.

David Lereah, chief economist for the Mortgage
Bankers Association of America, added, "Inflation numbers have been very good and the perception is that the Federal Reserve Board won't tighten interest rates anytime soon, which is having a very positive effect on the bond market." You need to keep at least half an eye on what bonds and bond traders are doing because the debt barterers help determine the levels at which lenders can obtain money and resell mortgages.

The "hum" -- the second thing helping hold mortgage rates down -- refers to the economy, which continues to churn out positive numbers.

"Solid economic growth means there is plenty of money available for investment," Gumbinger said. "A lot of this money is going into bonds, which pushed prices up and yields down."

After 5.9 percent growth in the economy in the first quarter of the year -- growth that was likened to a runaway train -- the numbers for the second three months of the year are known to have mellowed somewhat, again giving bond and mortgage investors confidence that Fed chairman Alan Greenspan won't soon touch interest rates.

And the lower rates are beginning to be felt by local mortgage makers. Your neighbors, kin and perhaps even you are making more telephone calls and visiting more loan offices to find out how good the gettin' gets.

And, for the first time in many months, a number of inquiring minds want to know about the policies and procedures regarding mortgage refinancing.

Pam Bartell, Buffalo branch manager for American Home Funding, said, "A number of customers which we had in our production pipeline back in 1996, which were floating (waiting to see if a better rate came along), then dropped out when rates rose, now are calling. The magic number is 8 percent, once you get down around the 7 7/8 percent, 7 3/4 percent mark, refis pick up."

Ms. Bartell said her current loan pipeline, or loans in process, consists of 18 percent refinancings, already higher than it's been all year. That number could grow significantly over the next several weeks if rates continue to do their swoon.

Robert Roth Sr., president of Marine Midland Mortgage Corp., concurred with his competitor. "We're starting to see not only our refi, but also the total volume of business increase," he said. "We're back into a mini-production boom."

Roth said his current ratio of refinancings to purchase loans is 20-80, but he expects refinancings to climb comfortably over the 30 percent mark in the not-too-distant future.

Will the good rates continue? Lereah of the bankers association said the downward trend could continue late into the year, when rates may tick up.

Gumbinger of HSH said there should be no rate uproar due to Fed interference. Slated to visit Capitol Hill today for his semiannual appearance, Greenspan is smart enough to know if it ain't broke, don't fix it, according to Gumbinger.

So mortgage rates are an excellent buy, and the Buffalo market has a glut of homes available in all price ranges.

The smart money would seem to say now is the time to buy or refinance.

And the best part is that smart money is very affordable.

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