Toll Brothers Inc. (TOL) is dusting off one of the housing boom's popular sales strategies: This weekend, the luxury home builder rolled out its twist on adjustable-rate mortgages - tempting buyers with 3.75% for seven years on conforming loans.

While the company is one of the first to revive the product since the sector's implosion, it's a move likely to be copied, despite the loan type's history.

"Anytime the buyer sees the word 'ARM' they're afraid," said Stephen Melman, the National Association of Home Builders' director of economic services.

During the boom, consumers were lured by loans that offered shockingly low rates, only to see them reset, sometimes quickly, with crippling payments. Those betting on climbing housing values to aid refinancing have been disappointed, as prices continue to fall. But Toll's offer - the latest in a long line of profit-eroding incentives to come from builders - didn't spark talk of another housing bust.

The company, one of the industry's most respected, says there's nothing exotic about this offer, available in many communities nationwide for contracts inked on or after last Saturday. Following the rate-lock period, the mortgage resets annually at 225 basis points over LIBOR, so the rate could even fall. The loan's lifetime cap is 8.75%, though "LIBOR would have to go up dramatically from where it is today," said Don Salmon, chief executive of TBI Mortgage Co., Toll's mortgage subsidiary.

For a true jumbo loan, the 7/1 ARM rate is 4.75%, with a 275 basis-point margin over LIBOR. There are no points to pay. Borrowers, who have to have a 720 credit score and put 20% down, can later refinance or sell the residence without penalty.

Horsham, Penn.-based Toll said it just ended its best week for traffic since early June.

"If traffic is up, they're really an industry leader, then. I think they're going to reach a lot of people who say 'Man, this makes sense for us,'" said Melman, who took out a 7/1 ARM in 2003. "I think they hit a home run on this thing."

Of course, it's too early to say if the rate will be enough to boost sales amid an elevated and swelling count of foreclosures, which pose stiff competition because they typically sell at steep discounts. Lending standards also remain strict, with even well-qualified buyers having difficulty getting a loan.

Because Toll caters to the move-up crowd, many would-be buyers have to sell an existing home, not all that easy in the current downturn.

This deal would make sense for consumers not looking to stay in a residence beyond seven years. And, because Toll caters to a wealthier clientele, this could appeal to those who could afford a higher rate but see the lower introductory percentage as financially savvy.

"What could be is the numbness from the subprime crisis might be receding, with an educated consumer realizing this could be a great deal if your personal situation fits," Melman pointed out.

That's good news for consumers, but, as with all incentives, Toll pays a cost. To offer lower rates, builders offer an upfront cash payment to the investor who buys the mortgage in a "buy down." It is treated as a cost of sale for the builder. Toll would not say how much this program costs.

Still, its margins remain among the sector's best, though they have fallen from their peak.

Because builders copy each other's marketing moves, others could soon roll out their own ARM version. As they limp through the worst downturn in decades, builders have tried everything to sell homes, including throwing in free upgrades, paid closing costs, vacations and even trying a down payment lay-a-way plan. Earlier this year, Toll shocked the industry with a rate fixed at 3.99% for the loan's life. Hovnanian Enterprises Inc. (HOV) did the same. At one point, Lennar Corp. (LEN) shaved its rate to 3.625%.

"The ARMs," Toll's Salmon said, "Haven't gotten a lot of attention recently."

-Dawn Wotapka; Dow Jones Newswires; 212-416-2193; dawn.wotapka@dowjones.com