HELOCs were all the rage during the loose lending days of the housing boom, when homeowners used their properties as ATMs. Originations for HELOCs peaked at just over $367 billion in 2005; their popularity then dropped dramatically along with home values to just short of $67 billion by 2010, according to CoreLogic. Then, as home prices mounted, and borrowers regained sizable equity, HELOC originations jumped back again in 2014-15 and should reach a collective $173 billion this year.
Not all HELOC borrowers actually use all of the line of credit, but for those who use some or all of it, they will see higher monthly payments as interest rates rise. The increases could average about $100 more per month but depend on the size of the loan.
"For those that have a high balance, clearly their payment will increase, and it will cause some prepayments" said Sam Khater, an economist with CoreLogic. "But rates simply reflect the supply and demand for money, and that is the growth rate in the economy."