Rising mortgage rates are likely to trigger a jump in mortgage defaults in California by the second quarter of 2005, according to Foreclosures.com, a Sacramento-based investment advisory firm.Alexis McGee, president of Foreclosures.com, said unemployment is no longer the main cause of foreclosures. "The problem now is that too many households are overloaded with debt," Ms. McGee said, noting that many consumers have continued spending by using adjustable-rate home equity credit lines. "You could say that homeowners got addicted to a combination of low interest rates and double-digit price appreciation every year. Now that combination has reversed itself." The housing market had begun softening in California but is now undergoing a year-end surge because "fence-sitters" want to lock in lower rates before mortgage rates rise further, she said. Ms. McGee predicted that California housing markets will slump in the first quarter, causing defaults to climb. The company can be found online at http://www.foreclosures.com.

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