Despite the lowest rates ever on adjustable-rate mortgages, the loans remain stubbornly unpopular - and lenders can't figure out how to write more of them.

"It's incredible," said Joe McNally, Mid-Atlantic region manager for NationsBanc Mortgage Corp., based in Dallas, Tex. "We can do adjustables in the 3% area, but fixed rates are so low that people are still leaning toward them."

Last week, lenders were offering one-year adjustables at an average of 4.33%, down from 4.38% the previous week, according to HSH Associates, Butler. N.J.

Tantalizing Rates

The rates are at their lowest levels since the loans were introduced in the early 1980s.

A number of lenders are even offering adjustables at less than 4%. For instance, North American Mortgage Co., Santa Rosa, Calif., offers ARMs at 3.125% and two points, according to HSH.

Despite such tantalizing rates, borrowers are overwhelming opting for the certainty of fixed mortgages, which were offered last week at an average of 7.17%.

In June, the latest month for which data is available, only 23% of new mortgages were adjustable, according to the Federal Housing Finance Board. And the share has not risen above 25% in more than a year.

Reluctant to Gamble

As recently as 1988, when interest rates were much higher, adjustables made up nearly 60% of the market.

In those days, with home prices rising, many homebuyers were drawn to adjustables because they knew they could sell their homes at a profit before the rate moved up. But that is no longer true, lenders say.

"I think the world is still conservative," said Mark Lynch head of retail originations with CenterBanc Mortgage Co. in Waterbury, Conn. "People learned the lessons of the '80s and are reluctant to gamble."

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