Stalled budget talks are having a subtle but appreciable effect on the mortgage market.

Most noticeably, 30-year fixed interest rates climbed a little last week, when President Clinton and Congress failed to come to an agreement about the nation's finances.

According to Freddie Mac's Primary Mortgage Market Survey for the week ended Dec. 22, the 30-year interest rate rose to 7.23% from the previous week's 7.15%.

HSH Associates shows a 6-basis-point increase for 30-year fixed rates to 7.54% for the week. The increases came even as the Federal Reserve lowered the federal-funds rate by 25 basis points, to 5.25%, early last week - such moves by the Fed typically pull long-term interest rates down.

A hike in long-term rates during a government shutdown does not necessarily have a historical precedent, said Frank Nothaft, deputy chief economist at Freddie Mac. But last week's slight upswing was definitely due to the government's inability to come to a budget agreement, he said.

"The sentiment in the market was that after last month's impasse, good progress was being made toward an agreement that would avert the current shutdown," he said last week. When that agreement couldn't be reached, he said, the market turned pessimistic.

Wall Street is worried about the possibility that the government deficit may be larger than originally estimated, Mr. Nothaft said. This anxiety traditionally pushes down bond prices, raising bond yields as well as mortgage interest rates.

Budget talks resumed Dec. 27. Their outcome should have a marked effect on the market, observers say.

If the nation's debt is permitted to rise faster than anticipated, more credit will be needed and interest rates will rise to reflect that demand, said Mark Zandi, chief economist for Regional Financial Associates of West Chester, Penn.

He predicted that adjustable-rate mortgages will rise if the federal government is reluctant to ease monetary policy and a budget is not agreed upon quickly.

But overall long-term projections continue to remain optimistic for mortgage interest rates. Freddie Mac's Mr. Nothaft said: "Our outlook is for a continuation of low and affordable level of mortgage rates as we go into the new year." He added that the Fed's decision last week to lower rates should pave the way for declining numbers.

Other segments of the mortgage market have also been affected by the budget impasse. The National Association of Realtors is attributing November's 1.7% decline in existing-home sales to lower consumer confidence in the wake of a protracted federal budget struggle.

Consumer-confidence figures dipped almost three points in December, the Conference Board reported this week.

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