Dec. 13 (Bloomberg) -- U.S. foreclosures begun on adjustable-rate mortgages rose to a four-year high in the third quarter as borrowers struggled to pay higher interest rates.

The share of the loans entering foreclosure, a legal process in which lenders try to seize property, climbed to 0.30 percent for so-called prime borrowers, or people with good credit ratings. The rate for sub-prime borrowers rose to 2.19 percent. Both are the highest since the second quarter of 2002, according to a report today from the Mortgage Bankers Association in Washington.

Surging home prices during the five-year real estate boom that ended last year spurred borrowers to choose riskier adjustable loans, many with rates that adjust annually, to afford real estate, said Doug Duncan, chief economist for the bankers group. The average rate for a 30-year adjustable-rate mortgage rose to a five-year high of 5.8 percent in the first week of July, according to Freddie Mac data.

``You're seeing the early edges of the reset phenomenon in the adjustables, particularly in the sub-prime market,'' Duncan said in an interview. In 2007, about $650 billion of U.S. home loans will reset at higher rates, he said.

For all loans, both adjustable and fixed-rate, the percentage entering foreclosure increased to 0.46, the highest since the fourth quarter of 2004, he said.

The total share of loans being foreclosed upon rose to 1.05 percent, the highest since the first quarter of 2005, from .99 percent in the second quarter, the report said.

Delinquencies or payments more than 30 days late on fixed and adjustable loans, rose to 4.67 percent, the highest of the year, from 4.39 percent in the second quarter. The last time it was higher was the fourth quarter of 2005 when it was 4.70 percent, the report said.

To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net.

Last Updated: December 13, 2006 13:20 EST