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I'm struggling to understand the logic behind how a 30 yr FRM can possibly be cheaper than a 5 yr ARM.

From an investor's standpoint, why would you want to encourage the borrower to lock in their extremely low rate for 30 years as opposed to a 5 year lock and then variable by offering the 30 year at a lower rate?

Unless the investor thinks rates will be lower in 5 years?

Please explain.

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