Merrill Lynch & Co. Inc.'s home-loan unit announced Tuesday that it is offering a "blended-rate" mortgage.
The loan is interest-only for an initial three, five, or seven years. During that time, the rate moves with the six-month London interbank offered rate - but only half as much as it would on a traditional adjustable-rate loan.
Afterward the 25-year loan begins to amortize and the rate is pegged at 2 percentage points over the six-month Libor and is capped at 5 percentage points more than the initial rate or 12%, whichever is higher.
In a press release, Larry Washington, the chairman and chief executive of Merrill Lynch Credit Corp., said the product offers "lower rates and lower risk."
"In light of interest rate concerns, this should be a very attractive option," he said.
