The latest Freddie Mac  Primary Mortgage Market Survey released on Thursday pointed to all signs of mortgage rates touching the 5 percent mark as early as next week. With the Federal Reserve  set to increase interest rates again this year, mortgage rates are expected to be impacted.
The real effect though would be felt by homeowners who have a home equity line of credit (HELOC) or an adjustable-rate mortgage (ARM), which are based on the short-term rates that get impacted by the increase in Federal interest rates. As a result, homeowners who have opted for these loans would see their monthly mortgage payments rise.
"Borrowers with outstanding ARM loans will see their rates increase at the annual reset, and rates for new ARM loans will also increase as the market anticipates further rate hikes," said Tendayi Kapfidze, Chief Economist Lending Tree after the Fed announced the rate hikes recently.
For example, a quarter-point increase on a $30,000 credit line for a HELOC would raise the minimum monthly payment by $6.25 per month, according to Bankrate's data.
According to Tony Ebers, COO, Mr. Cooper , a home has become the most valuable asset that owners can leverage in this environment.
“Rising interest rates affect not only the mortgage environment but credit card interest as well. In order to escape the cycle of credit card debt and mitigate rising credit card interest rates, homeowners may be able to leverage their most valuable asset—the home,” Ebers told DS News.
A recent survey conducted by Mr. Cooper found that 44 percent of respondents have $100,000 in home equity, which according to Ebers, can be capitalized by homeowners to help them save money and manage debt along with borrowing responsibly.
Speaking to DS News about the impact of rising rates on the overall market, Rocky Stubbs, SVP, Direct Lending, Flagstar Bank  said, “We’re entering the most challenging part of the cycle. While some first-time homebuyers may no longer qualify existing homeowners looking to upgrade but have locked into low rates now have the incentive to stay put and remodel rather than trade up.”
However, he pointed out that though these factors were likely to put pressure on price appreciation and home sales in 2019, the rates remained extremely low by historical standards. “While these changes may cool the market, they will not crush the market,” Stubbs said.