Rising interest rates have killed the market for mortgage refinancings, but they seem to have had only a minor impact on loans to buy homes.

How long can this continue? According to a new report by David S. Dusenbury, a securities analyst with CS First Boston Corp., there's still plenty of room for rate increases before the purchase market is seriously damaged - provided other factors remain stable.

Mr. Dusenbury uses the housing affordability index compiled by the National Association of Realtors as the starting point for his analysis. The NAR uses figures on housing prices, mortgage costs, and incomes to calculate the index, where 100 means that the average household can afford the average house.

"The value for the . . . index of 130.4 in September tells us that the median family had an income 30.4% above the minimum required to qualify for a mortgage," he writes.

Mr. Dusenbury concludes that "the composite index could increase by 300 basis points before the median household would be priced out of the housing market."

He adds that adjustable-rate mortgages expand the market because some of the households crowded out at the fixed rate could still afford a mortgage at the variable rate.

The analyst points out that ARMs now represent about half of the mortgage market. While the normal expectation is that the ARM market share would fall as the yield curve flattens, Mr. Dusenbury is expecting ARMs to get a boost from people who are switching to an adjustable rate to qualify for loans.

He is expecting the mortgage bankers' share of the market to continue to slip this year because of the pricing advantage held by portfolio lenders. But he predicts their share will eventually recover.

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