Bummer news for homeshoppers and would-be refinancers: The gravy train of rock-bottom lending rates looks like it jumped the track. Word came out today that over the past week, the average 30-year fixed-rate mortgage spiked to 6.26%, a level not seen since October 2002 (for more, see "Mortgage Rates Surge").

The news is ominous for bank shareholders, too. Banks and thrifts that deal in home financing have made a killing over the past few years. But some market watchers are wondering whether more sober times are in store for the so-called retail bankers.

Golden West Financial (GDW), however, looks better prepared to weather the rate reversal than most. During the second quarter, 91% of the company's loans were ARMs. That's a smart strategy, according to Dow Theory Forecasts, because as interest rates tick upward, lenders with with lots of long-term, fixed-rate mortgages on the books have no way to profit.

Golden West is also vigilant about cost-control and credit quality. The firm's expenses are among the lowest in the industry, and its ratio of nonperforming assets to total assets (a measure of bad loans) is a mere 0.6%. The company is the nation's third-largest savings and loan, with branch operations concentrated in California.

But even with its golden outlook, shares sell at a discount to the competition, or 12 times First Call's 2003 estimate of $6.91 per share. The stock trades at just two time its book value. Dow Theory analysts place Golden West's fair value at about $91 per share.

--Elizabeth Frengel

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