It looks like adjustable rate mortgages (ARMs) are falling out of favor — and with good reason. This morning, Freddie Mac announced that for borrowers refinancing, just 15 percent refinanced with an ARM. A whopping 85 percent refinanced with a fixed-rate mortgage.

As Freddie Mac deputy chief economist Amy Crews Cutts puts it: “With the recent contractions in mortgage lending standards and increasing emphasis on underwriting borrowers to fully indexed rates on adjustable-rate mortgages, it is likely that we will see more demand for fixed-rate products for both new home purchases and refinance in the future.”

Refinancing exotic mortgages into a still-low fixed-rate loan means you’ll be able to depend on making the same payment, month in and month out, through the life of the loan. With some ARMs adjusting as much as 6 to 8 percent, and payments doubling or tripling, counting on the same payment amount seems very steady.

Published: Aug 13, 2007