STRICTLY BUSINESS: TIME TO PAY OFF ON ADJUSTABLE MORTGAGES

Home borrowers will learn this year there is no free lunch.

While mortgage rates were climbing last year, adjustable mortgages offered relief. Instead of paying 8 or 9 percent for a fixed-rate mortgage, a borrower could get an adjustable loan with a first-year interest rate of 5 or 6 percent.

On the anniversary of the loans this year, rates will be adjusted -- most cases, by the two full percentage points the maximum allows.

What this translates into could be from $1,200 to $2,000 over the course of a year.

For the American economy, the rate increase will be the equivalent of a $10 billion to $20 billion tax hike.

The Federal Reserve has raised rates seven times in the past year in a deliberate bid to make it tougher for people to borrow and spend. The Fed is convinced that continued fast growth will lead to rising prices.

Some of those rate hikes immediately hit the consumer in the pocketbook.

Home equity loans, for instance, are tied directly to the prime rate, which in turn is linked tightly to the short-term rates the Fed controls. Over the past year, the prime rate has climbed from 6 percent to 9 percent and home equity loans -- usually adjusted every month -- have risen an equivalent amount.

Many credit cards also have adjustable rates tied to the prime. Typically the rates change every three months. The rates on fixed-rate mortgages are set daily in the marketplace. Over the past year their rates have climbed from near 7 percent to 9 percent.

But adjustable rate mortgages are different because they put off the day of reckoning. Last year, their growing popularity allowed the housing market to remain strong, even as fixed rates were climbing sharply.

Home sales slowed toward the end of 1994, but the dropoff wasn't dramatic. Adjustables allowed families to circumvent the rise in rates.

Adjustables appeal to two types of buyers -- those willing to gamble on rates and those who need help affording a home. The first group is betting the rates will decline. For most of the 1990s, that has been a safe assumption. The second group needs the lower rate an adjustable rate mortgage offers simply to qualify for a mortgage. Those people are hoping their income will increase in future years so they can keep up with the payments.

Most people who take the adjustable rates know just what they are doing, noted one mortgage lender. All of the advantages and disadvantages are outlined to the borrowers.

In 1993, when mortgage rates fell to their lowest level in 25 years, adjustables were not very popular. Who needed to gamble when you could lock in a rate of 7 percent for 30 years?

In 1994, conditions started changing. After the Fed began pushing up rates in February, mortgage rates began a steady ascent. Homebuyers took notice.

In February only 21 percent of the mortgages written nationwide were adjustable loans, according to the Federal Housing Finance Board. By June, adjustables accounted for 43 percent of all mortgages and by November they hit 55 percent.

By going to an adjustable rate mortgage, homebuyers knocked off anywhere from 2 to 3 percentage points from their first-year interest rates.

But, the discounts won't last forever. On the anniversary of the loans, rates will be adjusted closer to prevailing interest.

Typically, adjustable rates are pegged to the one-year U.S. Treasury bill. Over the past year the rate on those bills has climbed more than 3 percentage points.

In the case of a borrower with a $120,000 mortgage, roughly the national average for an adjustable loan, whose adjustable loan climbs the maximum 2 percentage points. At 6 percent, the monthly payment would be $720 a month. At 8 percent the payment goes to $880 a month.

New on business scene

Marcon has a new name.

Marcon, an advertising promotional company founded in 1978 by Dr. Charles Wiles and Dr. Judy Wiles, and purchased by Horizon Screen Printing in 1990, will take on its new name, Horizon Promotional Products, March 10.

Company representatives say it is to Marcon's advantage to operate under the umbrella of the larger and better known parent company, Horizon Screen Printing Inc., which ranks in the top 100 textile screen printers in America.

"Horizon Screen Printing, Horizon Promotional Products and Horizon Design Team more closely reflects the total capabilities of the business," the representative said.

The company, which services local, regional and national clients, employs 36 people.

Bill Evans Cleaners, 722 Good Hope, has a new owner, a new name and a new concept.

Rich Loomis, who operates Candy Cane Cleaners, 1 Plaza Way in Cape Girardeau, has purchased the Evans Cleaners and has renamed it Candy Cane Number Two.

"We're going to try something new in payments at the new cleaners," said Loomis. "People bringing their clothes to Candy Cane Two can pay in advance and receive a 25 percent discount."

Loomis, who has been in the cleaning business 27 years, is a graduate of the National Institute of Drycleaning.

Mid-America Mobile Systems, 320 N. Kingshighway, held its grand opening celebration last weekend.

Mid-America, owned by Gary Wilbers, is headquartered at Jefferson City and has offices at Rolla and Cape Girardeau.

The local office here opened recently.

"With the opening of our new store we will be serving both Southeast and Central Missouri," Wilbers said.

Helena Robideau of Sikeston is office manager at Cape Girardeau.

The Runway Restaurant snack bar is open.

Located in the lounge area of the restaurant at the Cape Girardeau Municipal Airport, the snack bar offers a variety of deli-type sandwiches, with chips, chili, desserts and beverages.

The snack bar will be open Monday through Friday, 2 to 7 p.m.

The Runway Restaurant dining room is open Monday through Friday, 6 a.m. to 2 p.m., Saturday, 6 a.m. to 2 p.m., and Sunday, 7 a.m. to 2 p.m.

Ryan's Steak House will open here March 22.

The 10,000-square-foot restaurant will seat between 375 and 400 people.

Ryan's Steak House, a chain based in Greer, S.C., is completing its restaurant immediately south of the Drury Lodge, at I-55 and Route K.

No Sam's plans for 1995

No plans are on the board for a Sam's Club warehouse in Cape Girardeau in 1995.

In September 1992, Sam's Club officials announced plans to build a 134,000-square-foot warehouse adjacent to the Wal-Mart Supercenter near the Route K-Siemers Drive intersection.

A year later, the plans were placed on hold, with an expected 1994 start.

Plans are still on hold.

The latest report from the Bentonville, Ark., headquarters of Wal-Mart and Sam's, is that the project isn't on the schedule this year.

V.E.R. Leasing, a property development company headquartered at Cape Girardeau, has started construction of Festus Centre, a 15,000-square-foot strip center at the intersection of Highway 61-67 and Highway A in Festus.

V.E.R. Leasing purchased property at the intersection in 1989. Since then, parcels have been leased to Eagle Bank & Trust, Autozone and Plaza Tire Service. In 1992, V.E.R. added another four-acre tract to its holding.

The new strip center, expected to be completed by late spring, has already entered into lease agreements with Blockbuster Video and a ColorTyme Rent to Own Store, which will combine to occupy half of the available space.

Boat notes:

The Missouri Gaming Commission says it plans to look next at Hilton Hotels Corp.'s plan for a dockside casino in downtown Kansas City.

Hilton has said it would spend $50 million on construction, plus $21.5 million on lawyers, architects, engineers, interest and other so-called "soft" costs. The company said it has already spent $10.5 million on the project.

Meanwhile, Jumer's of St. Charles Inc., which last week backed out of a riverboat casino project in unincorporated St. Charles County, said it wants another chance. County officials will decide Tuesday night whether to give Jumer's an extension to March 10.

Statewide, more than 15 applications are pending. Five casinos are open, two -- Boyd Gaming Corp. and Aztar Corp. -- are in the final stages of background investigation. The Hilton investigation is just beginning.

Bally Casino is hauling anchor and heading north.

Bally has closed its Mhoon Landing operation and set sail up the Mississippi River to Casino Center Drive in the northern part of Tunica County in Mississippi.

The move will put Bally in a location near eight other casinos, leaving only Splash Casino in the Mhoon Landing area, some 17 miles south of Casino Center.

The move for Bally came after negotiating a joint venture partnership with Lady Luck Gaming Corp., which has a 240-room motel near the Casino Center, on a 100-acre site..

Bally's will own the big chunk of the joint operation, 58 percent, with Lady Luck and Joe Bratta, the landowner, holding 42 percent.

Bally is hoping to re-open in June.

Horseshoe Casino opened in North Tunica County recently.

The new facility includes a 30,000-square-foot casino, 200-room hotel with plans to expand to 600, and has three restaurants.

Nine casinos are now operating in Tunica County.