The Adjustable Rate Mortgage, or ARM, lost much of its edge over the 30-year fixed in the last few years. Things actually got so tangled up for a couple of weeks in 2007 that the 5-year ARM, or 5/1 ARM, the most sought-after of them, demanded a higher interest rate than the standard 30-year mortgage. ARMs have traditionally offered lower rates due to their shorter maturity period and that they will adjust either up or down annually after their initial set time frame.

Even as recently as early January the 5/1 ARM and 30-year fixed displayed the same rate in Bankrate.com's weekly survey of big national lenders. Since then, however, the whole scenario has changed in a major way. Interest rates for these popular programs have been drifting in opposite directions, ARMs lower and 30-year fixed higher, to a point that the 5/1 ARM is now nearly ¾ of a percentage below its recent rival.

5/1 ARM, for instance, can be the right mortgage for a borrower who plans on living in his home for 5 years or less, anticipates income improvement and has some money saved. Its advantage is in lower payments thanks to a lower home loan rate. For that there is a minor risk factor involved, namely that the interest rate could rise if the loan is active beyond the fifth anniversary.

When the subprime mess descended on the mortgage industry over the last few years, ARMs gradually lost the attractive rate edge that eventually reached parity with 30-year fixed. But change is currently under way. Now that they are slowly widening the gap again, possibly pushing it all the way to where it historically stood before the lender problems started, does it mean that the home loan industry as a whole is returning to its previous, "normal" operating mode? It could be. Regardless, this certainly appears to be a step in the right direction.