Lately, we've been in a rising interest rate environment. Fear is prompting Cincinnati homeowners with ARMS  to abandoned their adjustable-rate mortgages in favor of fixed-rate mortgages.

This could be a costly (and ill-timed) move for some of those homeowners, from Hyde Park to Mason.

Throughout periods of rising interest rates, lenders adjust their 30-year lending rates to reflect their projection of the long-term, average interest rate.  So, right now, refinancing households moving into fixed products are paying a handsome premium to do so.

To understand this logic, let's look at lending from a lender's perspective.

In lending to a homeowner for 30 years at a fixed rate, the lender is tying up its money for up to 30 years -- a quantifiable and known risk. "We don't know where rates will be for the next 30 years," the lender's economists will say, "but we think it will average x%."

With the projection in hand, the lender will then offer a homebuyer a slightly higher rate.

See, rather than under-price long-term fixed interest rates, the lender will choose to over-price. Lenders do not want to lose money on their investment in your home and 30 years is a long period of time to tie up funds.

As lenders are building in this long-term premium, homeowners are playing right into the psychology. Just like most people are frightened out of buying into a falling stock market, they are unlikely to take an ARM in a rising interest rate environment.

Homeowners choose fixed-rate products more often in rising interest environments and pay a premium to do so. Conversely, fixed loans are priced at a discount as interest rates come down. and, as expected, customers move to ARMs.

ARMs remain less expensive than fixed rate products on a monthly basis and homeowners should always remember that the mortgage is just one component of an overall portfolio.

Rising interest rate costs should be no more relevant to a homeowner than falling stock values in their portfolio or higher life insurance premiums -- it is simply a diversifiable risk that can be managed

Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.