There has been all sorts of wild speculation about what calamities the year 2000 computer glitch could cause, but the chief economist for the National Association of Realtors sees a bonus from the problem: lower mortgage rates, at least for a little while.

Between now and the first week in January, billions of dollars owned by foreign investors worried about Y2K problems in their own countries will flow into the United States, pushing mortgage and other interest rates down, forecaster James F. Smith predicted at a news conference in Washington yesterday. There's no evidence that has happened yet, and other economists disagree with his forecast.

Smith said the temporary decline in rates would provide a short "window of opportunity" for U.S. homeowners looking to refinance their mortgages or for would-be home buyers, who could get the lowest interest rates in two years.

"Most of the rest of the world is not ready for Y2K," Smith said. "Germany isn't ready; Japan, the French--none of them are ready."

Smith admitted, however, that he thought the influx of foreign money would have begun already: "I thought it would start happening right after Thanksgiving."

Smith said that, although the Y2K effect will be temporary, mortgage rates could drop to as low as 6.9 percent on a 30-year fixed loan during January. Mortgage rates have risen more than a quarter if a percentage point this month; they reached an average of 7.86 percent last week, according to industry giant Freddie Mac.

"Rates have gone up steadily over the past three weeks," said Phillip Grisdela, vice president of Chase Manhattan Mortgage Corp. in Dulles. "I would love to be wrong, but I just don't see rates coming down." Nevertheless, Grisdela said he has a "list of people" ready and waiting to refinance in the belief that rates are indeed headed down.

"My thought would have been that if people were going to move money into the United States, they would have started doing it already," Grisdela said. "But nobody knows what is going to happen with Y2K, so anything is feasible."

David Lereah, chief economist at the Mortgage Bankers Association in Washington, conceded there could be downward pressure on rates because of Y2K problems around the world but thought it unlikely. "We're saying Y2K will have no impact and that rates will stay where they are," Lereah said.

In its 1999 Year-End Economic and Mortgage Market Outlook, secondary mortgage giant Fannie Mae also predicted there would be no drop in mortgage rates because of Y2K. Instead, the company's economists said, mortgage rates should rise steadily over the first half of next year. They foresee a drop in rates only during the second half of 2000.

Besides the Y2K glitch, which would benefit U.S. homeowners if his prediction comes true, Smith forecasts that 2000 will be a good year in terms of housing, interest rates and the economy as a whole. "Once Y2K concerns ease, interest rates will edge back up, but we're looking for an average of about 7.2 percent on fixed-rate loans in 2000," he said.

For the upcoming year, besides the temporary Y2K downturn, Smith predicted "mortgage rates will stay pretty stable," not surpassing the psychological barrier of 8 percent.

"It gives people a chance to keep shopping around for the house of their dreams," Smith said.

CAPTION: POISED TO DIP?

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