The question of where home mortgage rates are heading as the nation's economy darkens elicits an ambiguous answer from experts: They are fairly confident that no big changes are in store in the next several months, but hedge their opinions with some cautionary "ifs."
The wild cards that could drive the cost of money sharply higher are the Middle East crisis and the federal budget deficit, according to a survey of real estate economists and business analysts.
Their argument is: If war breaks out in the Middle East and oil prices escalate, inflation would heat up and rates could soar.
On the other hand, for long-term rates to fall significantly, the economy would have to falter to the point where inflationary pressures are counterbalanced.
But the consensus is for long-term, fixed-rate home loans to remain roughly in their current range -- generally from 10 percent to 10.5 percent.
Over the last 4 1/2 years, 30-year fixed-rate mortgages have fluctuated in a "very narrow range of about 1 percent with only small blips up and down," said Jesse Abraham, senior economist for the Federal Home Loan Mortgage Corp., a major secondary market purchaser of home loans.
"It's not unreasonable to project the same scenario forward through at least the end of the year," Mr. Abraham said.
Rates have remained stable -- with occasional run-ups and dips -- both because demand has declined along with the faltering economy and inflation, until recently, has been been relatively low.
Mr. Abraham noted that the average 30-year home loan rate in 1986 was 10.2 percent. The average last year was 10.3 percent and about the same average is projected for this year, he said.
Ross Bennett, vice president and area manager of Market Street Mortgage in Winter Park, Fla., said the decision on whether to lock in a mortgage rate is a personal one.
"Some people are happy to lock in a 10 percent rate and not worry," he said. "Others are willing to gamble that rates may go down before they have to make a move."
Mr. Bennett said people buying existing homes are more likely to lock in a rate because the house is built and ready for occupancy.
Those who decline to lock in a rate on their mortgage, however, shouldn't be surprised if they bet wrong and rates rise. "Trying to guess on rates is like trying to guess the top or the bottom of the stock market," he said.
For long-term rates to fall significantly, the economy must get weak enough to counterbalance inflationary pressures, said David Scott, executive director of the Phillips Institute for the Study of American Business Activity at the University of Central Florida.
That hasn't happened yet.
"Right now the economy is weak, but not on its deathbed," Mr. Scott said.
Two segments of the national economy are in recession -- the housing and automotive industries -- but others are holding up fairly well, he said.
If a federal budget deficit reduction package of spending cuts and tax increases is approved by Congress, the Federal Reserve Board may try to encourage lower interest rates by cutting the federal fundsrate -- the interest banks charge each other for overnight loans -- from 8 percent currently to 7.75 percent, Mr. Scott said.
That would help make money easier to get, but primarily would affect short-term rates.