Final answer:
It is false that one should seek an adjustable-rate mortgage (ARM) if expecting a rise in interest rates. A fixed-rate mortgage is more suitable to lock in the current rates and avoid future increases that would occur with an ARM.
Step-by-step explanation:
The statement in the question is false. If you expect interest rates to rise in the future, it would generally be more advisable to secure a fixed-rate mortgage rather than an adjustable-rate mortgage (ARM). A fixed-rate mortgage locks in your interest rate for the duration of the loan, protecting you from future rate increases. Conversely, an ARM has an interest rate that adjusts with market rates, meaning your payments could increase significantly if interest rates rise.
An ARM may start with a lower interest rate compared to a fixed-rate loan, as it transfers some inflation risk from the lender to the borrower. With an ARM, higher inflation can lead to higher interest rates on your mortgage, which increases your future payments. Therefore, if one anticipates higher interest rates due to inflation, an ARM could eventually become more costly than a fixed-rate mortgage.