Rising Mortgage Rates Worry Those with ARMs, Survey Says

Despite the presence of caps on adjustable-rate mortgages, payment shock can still hit those that aren’t prepared for a significant hike on their home loans.

Such is the current situation for many homeowners who are worried about rising interest rates - although most believe they’ll be able to refinance their loans if necessary, according to a study released Monday.

An survey of homeowners conducted for Wells Fargo & Co. found that about one in seven respondents had an adjustable-rate mortgage (ARM).

The study found that nearly 80 percent of homeowners with ARMs said they were “somewhat” concerned, “very” concerned or “extremely” concerned about an impending hike in their mortgage interest rates.

A plan for mortgage refinancing: More than half the respondents said they believed they could successfully go through mortgage refinancing of their loans, if needs be; while about 20 percent said they were prepared for rate adjustments and didn’t plan any changes.

Doreen Woo Ho, president of Wells Fargo’s consumer credit group, said that homeowners “still have the ability to refinance now.” She noted that “while rates are higher than a year ago, they’re still low by historical standards.”

The mortgage company Freddie Mac reported last week that the interest rates on 30-year, fixed-rate mortgages averaged 6.40 percent in the most-recent survey period. A year earlier, the rate was 6.15 percent.

Wells Fargo’s third annual homeowners’ study also found that individuals expect their properties to appreciate, although they evidently are aware that price increases are slowing.

Woo Ho said that one surprising finding was that younger homeowners - especially those born since 1964 - view their homes as a good investment as well as a place to live. Overall, 72 percent of those surveyed said the equity in their home was their most important investment.

“That’s a shift,” Woo Ho said. “A home is now considered a major part of homeowners’ financial portfolios.”