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Most HELOCs have adjustable rates tied to the prime rate. So if you're shopping for one, you'll see rates rise almost immediately when the Fed hikes its rate, but the extra cost to you may not be onerous.Say the Fed funds rate goes up another 25 basis points. The monthly payment on a $30,000 HELOC will go up about $4, said Keith Gumbinger, vice president of mortgage information provider HSH Associates. (If you count the effects of the first two quarter-point hikes this year, which added $9.00 to your bill, you may end up paying a total of $13 extra per month.)
If you already have a HELOC, you'll probably have at least one billing cycle before you feel any effect, Gumbinger said.
And in some cases you may have as long as three billing cycles, if your lender bases its HELOC rates on the prime rate that was in effect 90 days ago.
You may not feel the effects of an September rate hike at all if you're already paying a "floor" rate on your HELOC. The "floor" is the base rate below which the lender will not go.
Since rates fell so far in the past few years, there are still some lines of credit sitting at their floors, according to Gumbinger. So even with a rate hike, the new HELOC rate (equal to the new prime plus a margin the lender sets) may still be less than your floor.
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