Merrill Lynch Credit Corp., New York, has announced the introduction of the Blended-Rate mortgage, an adjustable-rate loan that it says combines the lower rates of an ARM with the lower risk of fixed-rate mortgages.The Blended-Rate mortgage helps diversify interest-rate risk by combining a fixed rate and an adjustable rate during an initial period of three, five, or seven years, Merrill Lynch said. The blended rate rises or falls half as much as a traditional adjustable-rate mortgage, providing greater protection against rising interest rates, the company said. The loan includes interest-only payments during the blended period, and rates are adjusted semiannually based on the six-month London interbank offered rate. After the blended period, the loan is amortized and the rate continues to adjust semiannually based on the six-month LIBOR plus 2%, Merrill Lynch said. "Until now, homeowners have had two basic choices -- paying for the security of a traditional fixed-rate mortgage or taking on more risk to benefit from lower rates and lower monthly payments with ARMs," said Larry Washington, chairman and chief executive officer of Merrill Lynch Credit. "The flexibility of the Blended-Rate mortgage can offer clients both lower rates and lower risk." The company can be found online at http://www.ml.com.

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