I have a home equity line of credit with an adjustable rate. Currently (as it has been for quite some time), it's sitting at 3.5%. I understand that we're not sure how much interest rates will rise, and that no one can really predict specific numbers, but I'm having trouble "guesstimating" what my interest rate may increase to. Is it reasonable to assume it will stay under 4% or is that naive and I should be expecting for it to go closer to 5% or more over the course of the next 12-18 months?

Obviously there are plenty of opinions and conjecture that could arise, but I'm looking for answers based on historical trends and knowledge of how and when ARMs are adjusted.

1 Answer 1


Each ARM has a rate that they follow. There is also an offset from that rate so it may be prime +1 or something similar. You can see if there is movement in that base rate.

Each ARM also has a maximum amount they can move in one adjustment, and a maximum rate they can have during the life of the loan. Some arms adjust every year, others adjust less often.

You need to check your documents to see what the rules are for your loan. Every ARM is different.

If you are concerned about affording the increase you may consider refinancing to a fixed loan. You can also start to prepare by setting aside the extra amount that would be needed into a savings account to pretend the higher rates have already happened.

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