
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, February 3, 1995                   TAG: 9502030058
SECTION: BUSINESS                    PAGE: A-7   EDITION: METRO 
SOURCE: Associated Press
DATELINE:                                 LENGTH: Medium

DEMAND FOR CREDIT TO SLACKEN

Virginia's economic growth won't be completely strangled by the Federal Reserve's half-point boost in short-term interest rates, although the demand for credit will be dampened, say state bankers and economists.

``The economy is starting to show signs that previous rate hikes have taken effect,'' said Christine Chmura, an economist with Richmond-based Crestar Bank. ``Car sales have been slowing, and Christmas sales were not nearly as great as retailers had expected.''

However, she said, ``there are no signs of any great imbalances that could cause the economy to halt.''

Wednesday's move by the Fed prompted Crestar and other major banks in the state to raise their prime lending rates to 9 percent from 81/2 percent. A year ago, the prime rate - the base rate that banks charge for most commercial loans and some consumer loans - was 6 percent.

``As the cost of money goes up, the cost of the product goes up and the qualifications of the buyers go down,'' said Edward P. Brogan, president of Brogan Enterprises, a residential builder and remodeler in Virginia Beach.

Also, car buyers can expect to pay higher rates on auto loans, although the increases may be slower to take effect than rates on loans pegged to the prime rate.

In Virginia, rates for new car loans now range from 7.99 percent to 8.49 percent, Bowman said.

On the other side of higher loan rates are higher payments for savers. With past increases in short-term rates, many Virginia banks were slow to raise rates paid for consumer deposits.

But that's changing, said Richard F. Bowman, treasurer and chief financial officer of Falls Church-based First Virginia Banks.

by CNB