LOWERING RATES TRIGGER REFINANCING AND SOME HOME BUYING

With mortgage rates falling to their lowest levels in 18 years, homeowners looking to refinance their existing mortgages have caused business to boom for some lenders.

One Cape Girardeau lender said it has been hit with "a tidal wave" of refinancing applications since dropping its rates on a basic 30-year fixed-rate loan below 8.5 percent in response to the recent Federal Reserve discount rate cut.

Another lender, however, reported that while the rate cut has produced an increase in business, a lot of would-be borrowers still are holding off expecting rates to head even lower.

"We're seeing a lot of requests to reduce interest rates on home mortgages," said Debbie Davis, loan associate at Boatmen's Bank of Cape Girardeau. "For a while, refinancing was the bulk of our home loan business. Only recently have we been receiving requests for home purchases."

Karen Rigdon of Farm & Home Savings Association said the first-time home-buying program is generating considerable interest at her institution.

"Consumers who are eligible for this program can receive 7.55 percent rates on a 30-year fixed loan," said Rigdon.

Farm & Home also offers VA and FHA home loans.

"Interest rates on these loans range from 8 percent for VA loans to 9 percent for FHA loans," said Rigdon.

The Federal Home Loan Mortgage Corp. said the average rates on 30-year mortgages could now be obtained for 8.35 to 8.8 percent.

These rates are the lowest since August 1973, when the national average fixed rate was about 8.2 percent.

"Fixed rates between eight and nine percent are common," explained one realtor in Cape Girardeau. The current local rates range from a low of 5.25 for a one-year adjustable to 7.7 for a 15-year fixed, to 8.25 for a 30-year fixed mortgage.

With these rates, many homeowners with loans carrying rates of 10 percent to 14 percent or more are finding it advantageous to refinance and possibly save several hundred dollars a month in interest costs.

With rates down on shorter-maturity loans, notably on 15-year mortgages, some borrowers are opting for those shorter loans, which allow them to pay down their mortgages earlier. That costs consumers more money in the short run with heavier payments, but can save them thousands of dollars in interest costs over the life of the loan.

"Some people are still playing the waiting game," said one spokesman. "There have been some predictions that rates may go yet lower in the new year."

A bank spokesman, however, said that lower rates might not accomplish the desired goal of reviving the economy. "A lot of people are still waiting to see what happens with the economy."

House buying also helps the economy and the entire home-building industry.

When people buy houses, it helps the economy, they buy furniture and rugs for the house, creating a ripple effect, said a lender.

People in Cape Girardeau County have been buying homes the past few months.

Realty activity in Cape Girardeau, Jackson and Scott City has been good the final quarter of 1991 and the first month of 1990, according to realtors.

Carl Blanchard, president of the Cape Girardeau County Association of Realtors, said that more than $37.8 million in sales were recorded in Cape Girardeau, Jackson and Scott City. Of that, $28 million was in Cape Girardeau, and more than $8 million was in Jackson.

He added that the average price per home was $63,900 in Cape Girardeau and $68,794 in Jackson.

Some area realtors, including Blanchard, are predicting a 15 to 20 percent increase in area home buying in 1992.