mortgages and deposit yields, according to Bermuda Home president Mr. Arthur Haycock.

But he also hinted in his latest letter to shareholders that the mortgage company may extend terms for mortgages, opening home buying opportunities to more Bermudians.

For many years, lenders wanted significant down payments from borrowers who were expected to pay off their mortgages in 15 to 20 years.

This contrasts with the US, Canada and the UK, where 20 to 30 year terms were normal and a smaller percentage of the purchase price is expected as a down payment.

Bermuda Home now offers 20 year mortgages with a 35 percent down payment.

Their letter states: "We are also reviewing the implications of offering extended terms for first time home buyers to improve Bermuda Home's competitive position.'' Mr. Haycock said yesterday: "We are looking at the possibility of broadening our mortgage products in trying to help the first time home buyers. Whether that means going beyond 20 years for mortgages or not, we don't know. No decisions have yet been made.

"There is likely to be an interest rate implication and we are looking at that issue. We are trying to make the monthly payments more affordable. The down payments right now can be high, as well. We are conscious of that.

"We are looking at a couple of ways of improving the standard mortgage that we provide. It is just premature to discuss at this stage, because we have not yet determined what we will be able to do.'' On the subject of interest rates, Mr. Haycock said that increases can occur in the months ahead, especially for longer terms deposits, "so as to maintain deposit levels and to keep funds from moving into other forms of investment or into foreign currencies''.

He noted limited moves already that have provided interest rates of a compounded 7.496 percent for deposits of five years or more.

It has been widely speculated that the Federal Reserve Board in the US, after raising interest rates six times last year, are headed for another hike before spring. See story, Page 11 .

Mr. Haycock said: "As rate increases become more prevalent, banks and deposit companies will have no option but to offset the additional costs by increasing loan and mortgage rates.

"While Bermuda Home is conscious of the effect higher rates have on our borrowing customers, it has become necessary to advise those borrowers whose mortgage rates were reduced during the last two years that their interest rates will shortly revert to the previous level of nine percent.'' Mr. Haycock said that to protect customers from frequent rate changes, fixed rate terms and other products are being looked at.

He added that mortgage applications to Bermuda Home have fallen, instead of rising as expected.

In the shareholder letter, he reported financial results for the quarter to December are being finalised and preliminary figures suggest the new firm could meet its targeted goals.

But Mr. Haycock said: "Mortgage closings, however, have been below projections for the third quarter partly as a result of the extra workload and time required by our staff to transfer the mortgage accounts to our computer system.'' Total mortgages and loans at the end of November were valued at $322 million, while customer deposits amounted to $424 million. Total assets were at $469 million.

And he said this week: "It is primarily the workload, but in fact, there has been a slight fall off of new business, new requests for mortgages (when compared with figures from the former Bermuda Mortgage & Finance). It's very flat.

"The previous year, `93 to '94, was a pretty good year for Bermuda Mortgage & Finance. This year's projections were higher than what actually was realised.

Our projections had been made when considering what had happened in the first quarter of the previous year.

"There's still some question as to how buoyant the real estate market is. I think a lot of people are holding off on the second home, the investment home market. The number of uncertainties that Bermuda is facing, perhaps the Independence issue, may be factors. It's hard to say.

"There's not just the same degree of buoyancy in the real estate market as it was in past years. It may be improving over last year slightly, but that tends to be people wanting to buy a house for their own use, primarily.'' The board of directors declared a common share dividend for the quarter ended December 31 of 10 cents per share. A dividend of 20 cents per share was declared on the 8% Convertible Preferred Shares to shareholders of record January 17.