Lenders worry that low rates will fail to spur homebuyers.

Interest rates on home loans are starting to push below the 7% mark, and refinancings continue to soar as a result. But mortgage lenders are worried that no matter how low rates may go, originations for purchases will stay flat.

A survey of lending rates by HSH Associates of Butler, N.J., shows that average 30-year fixed rates in many cities are hovering around 7% -- which means that many lenders are already offering mortgages below that figure.

No Strong Pickup

Boston. according to preliminary findings, has the nation's lowest average rate, at 6.96%.

Yet despite some of the lowest rates in the country, lenders in Boston report no strong pickup purchase-related lending.

"We're trying to attract some new loans and not just refinancings, but it's tough,'" said Richard Grane, president and chief operating officer of Hyde Park Savings Bank in Boston.

"The rest of the country may be coming out of a recession, but we've lost a lot of jobs."

Those comments were echoed by Steve Deardorff, vice president of CTX Mortgage Co., Dallas, where the average 30-year fixed rate was 7.03%.

Economic Worries Cited

"We're surprised the lower rates haven't spurred new purchase activity," he said. "It's really a reflection of people's concern about the economy."

Philadelphia is another metropolitan area with low rates -- an average of 7.02% -- and there the story is no different. Banks see lower rates bringing about the predictable refinancings.

"We're getting the people I call the procrastinators, people who missed the last two waves of refinancings and are now coming out of the woodwork," said Joseph Murphy, vice president at Frankford Bank in Philadelphia.

Public Seen as Jaded

It may simply be that consumers, used to ever-falling rates, have become jaded.

Peter Treadway, an analyst with Smith Barney Shearson Inc., thinks that 7% is not a particularly important barrier psychologically.

"It may cause some people to come to market, but its not like 10%," he said.

Orlando has the highest 30-year fixed rates in the nation, averaging 7.23%.

Next is Minneapolis, at 7.19%.

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