Research has shown the main appeal will be the sticker price of rates, even though the main rational support for a decision should be around income and tenure — how long the buyer expects to remain in the home.

A 2009 study, "Why Do Borrowers Choose Adjustable-Rate Mortgages over Fixed-Rate Mortgages?: A Behavioral Investigation," found people who were generally risk averse when buying bonds were more willing to take the risk of financing their home through an adjustable rate mortgage.

The researchers led by Masaki Mori performed an experiment that showed that borrowers who had a strong desire for current consumption were more likely to choose an ARM's lower payments even with its expense of higher exposure to future rate hikes.

If the consideration is reason, a 2003 study found that ARMs are the best choice for buyers when their mortgage payment represents a relatively small portion of their income, their income is stable and the probability that they will move is high.

But research also shows that the distance is vast between what people ought to do and what they actually do.

Studies in the 1990s found that teaser rates and points had the dominant effect on decision making between ARMs and FRMs.

"When ARMs are cheap relative to FRMs, borrowers will choose ARMs. In general, borrower characteristics, such as age, income and mobility, are found to have only a weak influence on mortgage choices," according to Mori.

The Filene Research Institute has recognized the extent to which irrationality pulls the levers of decisions. The non-profit based in Madison, Wis., which advises credit unions, recently opened its Center for Consumer Decision Making at the University of Arizona.

"Consumers think very differently about financial products than financial institutions do," George Hofheimer, Filene's chief knowledge officer, said. "Understanding the whole rational versus behavioral side of things is important for credit unions to understand."

Some parts of our lizard brains pull us in different directions.

For example, humans' aversion to loss tends to favor the immediate savings of adjustable rates. "People will take money today over money tomorrow," Hofheimer said.

Yet the comfort of simplicity, the appeal of certainty and the power of inertia lead people back to the 30-year FRM. People rarely rebalance their 401(k) portfolio, they avoid changing the terms of their car insurance and with mortgage rates, they want to "set it and forget it," Hofheimer said.

"There's so much logic that adjustable rates make sense," Hofheimer said. "The average time in a home is seven years, so why are you buying a 30-year mortgage?"

"For a lot of consumers, the fixed rate makes sense to them," he added. "Once people make a decision around big financial products they tend to just stick with it."

Adjustable rates have typically been most popular for mortgages on expensive homes. Not surprisingly, credit unions with the greatest experience originating ARMs tend to serve those markets.

For example, the Silicon Valley's First Technology Federal Credit Union ($9.5 billion in assets, 465,319 members) originated $172 million in mortgages in February. ARMs accounted for $70 million: $40 million in 7/1s, $20 million in 10/1s and $10 million in 5/1s.

Bruce Dickinson, First Tech's SVP of mortgage lending, said credit unions' advice to borrowers is critically important, even among affluent borrowers served by the Mountain View, Calif.-based credit union.

Most people will never buy more than three or four houses in a lifetime. "If I do something so infrequently, it's hard to become an expert," Dickinson said.

Markland of Bethpage ($6.9 billion in assets, 303,851 members) said talking to members about adjustable rates is an individual conversation. "When you're talking to the applicant, that's when you need to understand their needs, what are they trying to accomplish," he said.

Lenders should ask borrowers to consider how long they expect to live in the home, their current income and their future earning potential.

For example, a lender might have two sets of buyers each with the same income, same number of kids and similar job outlooks. One couple hopes to live in the neighborhood for the rest of their lives; the other couple expects a transfer to another city within four to five years.

"The key factor there is their time horizon," Markland said.

In the past, most homes were sold or mortgages refinanced within seven years. Recently the life of a mortgage has fallen to 4.5 years, but "as interest rates go up, that number will go up," Vince Salinas, vice president of home loans for Patelco Credit Union, said. The credit union, based in Pleasanton, Calif., ($5.5 billion in assets, 307,803 members) has many members in the San Francisco Bay area with large incomes who look at their monthly mortgage payment as a carrying cost of an investment, a cost they want to keep as low as possible.

But the initial cost isn't the full picture.

"Even though you have people who are higher wage earners, the level of sophistication isn't necessarily correlated," Salinas said.

"You do have to sit down with people and help them understand how the rate will change over time," he added. "Hopefully, that's part of the value we're adding."

Most ARMs are 5/1s or 7/1s, that is, they first reset after five or seven years and then adjust annually thereafter.

Patelco also offers a 5/5 ARM, which resets after five years and adjusts every five years thereafter. It comes with interest rate caps that limit the movement of the rates at each adjustment, typically by no more than two percentage points. It also has a lifetime cap that limits the movement to five to six percentage points.

The spread between the 30-year FRM rate and those for ARMs has been greatest when rates are high. As rates pushed below 4% they compressed the spread, making ARMs less attractive. As rates rise, ARMs are likely to become more popular again.

Current spreads are about one-quarter to five-eighths percentage points. If rates rise to 5%, the spread will still be about the same, Dickinson said.

For someone financing $400,000, the monthly principal and interest would be $1,910 on a 4% 30-year FRM, compared with $1,796 on a 3.5% 5/1 ARM. The $114 the borrower saves each month represents a 6% discount.

If the fixed rate were 7%, then principal and interest would be $2,661 per month. If the spread allowed an ARM at 6%, the payment would be $2,398, a savings of $263, or 10%.

The small savings potential with an ARM under current rates is maintaining strong demand on Long Island for fixed rates, Markland of Bethpage said.

"If the rates are back up in the 7% to 8% range, I think you'll see a lot of people get variable-rate loans because there will probably be a higher propensity of rates to fluctuate down as opposed to up," he said. "People will get into more variable-rate products to keep their rates down and their payments down for as long as they can and for as much as they can afford."