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Greenspan challenged the mortgage industry to offer new products that bring down the cost of peace of mind. Most buyers couldn't care less how much of their monthly payment represents interest; they just want to know the payment won't change. One way to fix the payment without the cost of fixing the rate is to hold an adjustable-maturity mortgage--in which the payoff period, not the monthly outlay, rises and falls with interest rates. Outside the U.S., fixed-rate deals are far less common, and adjustable-maturity mortgages are readily available. An ARM with a lifetime rate adjustment of just 2 percentage points (as opposed to the standard 6) also addresses this issue.
At least homeowners who have a good idea of how long they'll stay put have options right now. So-called hybrids--for which the rate is fixed for three, five, seven or 10 years and then reset annually--make a lot of sense, allowing you to shave up to 1.5 points off the 30-year fixed rate.