BANKERS, REALTORS UNALARMED BY RATES

State and area bankers, realtors and lending groups predict the Federal Reserve's seventh interest rate increase in 12 months will have an immediate impact on short-term loans and the affordability of new homes.

"The two rates that will be affected the most by the increase will be home equity and construction loans," said Gene Barnes, assistant vice president for Roosevelt Bank of Springfield. "What this means for the person who is a borderline qualifier on a particular loan is that he or she will have to settle for a little less house than before."

But, he added, long-term rates won't be affected by the latest increase. The impact will be on the short-term loans, such as those on cars.

Capital Bank President Charles Daniel said he had no immediate plans to raise mortgage interest rates. Daniel said the only change thus far is in making the prime lending rate 9 percent and moving deposit rates up slightly.

"I'm not saying we won't change tomorrow or the next day on mortgage rates, but right now we're not doing anything," Daniel said. "Obviously if other banks begin raising mortgage rates, we may choose to follow."

A quarter-point increase isn't very much "when you consider how mortgage rates fluctuate in other parts of the country," he said, adding that Cape Girardeau's economy doesn't have a wide fluctuation.

Boatmen's increased its one-year and three-year adjustable percentage rate mortgages 25 basis points or .25 percent. Thus a three-year mortgage that was once 8.75 is now 9.0. A one-year mortgage that was 7.0 is now 7.25.

David Shell, vice president and manager of the real estate department of Boatmen's Bank in Cape Girardeau, isn't alarmed by the recent increase in interest rates.

"Realistically, I would consider the rates we have right now to be attractive in a normal market," Shell said. "The rates were almost artificially low two years ago when they dropped lower than they had been for 25 to 30 years."

Shell predicts consumers will wait to see if there is another increase soon.

"If there isn't another one in the next few months, I think we'll see the same consumer trends that we saw before the latest hike," he said.

Sandy Schooley, branch manager for American Lending of Cape Girardeau, said she sees no drop-off in customers seeking loans because the interest hike came on Wednesday.

"The interest rates are still a bargain in comparison to other parts of the country," she said. "We are creative enough that we can get people loans despite an increase in interest rates."

Barnes said Springfield is experiencing a construction spurt similar to the one in Cape Girardeau and Jackson.

Neither market is over supplied, he said, adding that both areas have a strong demand for houses.

People buying new homes probably will stick with their plans, but "they'll think twice about what they can afford with the new interest rates," he said.

The Fed's half-point increase Wednesday in two key rates was followed immediately by a similar surge by major banks in their prime lending rate, pushing it from 8.5 percent to 9 percent. This is the highest level for such a telling rate since early 1991.

Thirty-year, fixed-rate mortgages have generally followed the Fed moves and averaged 9.19 percent in December. That is up from less than 7 percent last February, when the central bank initiated its rate hikes.

Barnes said construction loans will likely be a half-point higher than before.

A jump from 7 percent to 9 percent would add $209 to the monthly payment on a $150,000 mortgage.

"That's a significant increase for someone who is just able to make each payment," Barnes said.

Barbara Baker, who owns Town & Country Realty in Cape Girardeau, said the jump in mortgage rates will force buyers to settle for what they can afford.

Mindful that new home sales in Cape Girardeau and Jackson have been brisk in the last few years, Baker doesn't expect that trend to change significantly soon.

Some 458 homes were sold in Cape Girardeau in 1994. New home sales in Cape Girardeau reached $35.35 million. In Jackson 231 homes were sold last year. Jackson's new home sales reached $18.1 million last year.

The average home in Cape Girardeau sells for $81,777. The average home in Jackson sells for $81,967.

Subdivisions have sprouted up at a healthy rate in both Cape Girardeau and Jackson in recent years. There are 20 subdivisions in Jackson and 30 in Cape Girardeau.

Baker said the shortage of homes in Cape Girardeau in the $125,000 and under price range could be remedied by a change in the property gains tax, which is 28 percent.

"No one wants to sell homes they have fixed up because they have to give back 28 percent of what they make," Baker said. "I think if it got down to about 14 percent, you would see a lot of activity in homes costing $125,000 or less being placed on the market."

Nationally, sales of new homes rose 0.6 percent in 1994 to the highest level in six years. However, there are signs such growth began to slow as mortgage rates increased.