Recently, the reputation of adjustable-rate mortgages has taken a beating. Critics allege that ARMs have doomed millions of homeowners to foreclosure.

This criticism is somewhat unfair. ARMs remain a worthy option for homeowners who expect to remain in their homes for less than a decade and are looking for a lower interest rate.

Bob Walters, chief economist at Quicken Loans, says he knows firsthand the upside of taking out an ARM instead of a fixed-rate mortgage.

"I've never taken anything but an adjustable-rate mortgage," he says. "I understand there are risks to that, but on the other hand, I've benefited greatly."

However, not all ARMs are created equal. Lately, ARMs tied to either the one-year U.S. Treasury index or the Federal Home Loan Bank's 11th District cost of funds index have fared best, with rates holding steady or dropping in recent weeks.

Many U.S. adjustable-rate mortgages are tied to the London Interbank Offered Rate index. Typically, Libor rates closely track the federal funds rate. When that is the case, Federal Reserve rate cuts send Libor rates -- and homeowner mortgage payments -- lower.

However, the spread between Libor and the federal funds rate has grown wide in recent weeks, as sometimes occurs in times of economic crisis. Although the spread has narrowed a bit recently, it remains larger than normal.

As a result, homeowners with ARMs tied to the Libor index should not automatically expect their payment to drop as a result of the latest Fed rate cut.

Fixed-rate mortgages are not the spectacular deal they were in January, when rates fell as low as 5.57 percent. However, rates still remain low by historical standards.

As a result, fixed-rate mortgages remain a good deal for people who expect to remain in their homes for many years to come.

The Federal Reserve's decision to trim the federal funds rate by a half-point will not directly affect mortgage rates. Fed actions change the federal funds rate, which is not directly correlated to mortgage rates.

Right now, fixed-rate mortgages remain cheap by historical standards, and the rates on adjustable-rate mortgages are even lower.

Despite these low rates, the current economic turmoil may frighten some potential buyers away from shopping for a new home. The present crisis unnerves even normally unflappable economists such as Walters.

"I'm fearful," he says. "These are difficult times."

However, low interest rates and falling home prices mean there are plenty of bargains for courageous shoppers.

"I will say this: If you need a home, this is actually one heck of a time to buy," Walters says.