RIVERSIDE, Calif. - The proportion of home loans made at adjustable rates continued to decline in the first quarter of 1995 as the gap between long-term and short-term interest rates narrowed, according to TRW Redi Property Data.

In a study of lending activity in 29 metropolitan counties around the country, TRW Redi, a nationwide real estate information company, found that adjustable-rate mortgages accounted for 37% of originations in March. This is a much lower number than the 44% reported by the Federal Housing Finance Board for March.

TRW said its figure was down from 43% in December of last year. Borrowers began flocking to ARMs in the second quarter of 1994 as rising rates made fixed-rate mortgages less attractive. But the difference between long-term and short-term rates has narrowed recently, causing ARMs to lose ground to fixed-rate loans.

ARMs are most popular in the Western states, particularly California, where in March they accounted for 54% of originations in the San Francisco Bay area and 42% in the Los Angeles metropolitan region. In contrast, the share of ARMs in total originations stood at 12% in South Florida, 22% in the Dallas-Houston area, and 26% in Hartford, Conn.

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