The U.S. Federal Reserve has raised interest rates five times since June, with more hikes being predicted. Short-term interest rates raised 15 times over the past two years and rates on home equity lines of credit are at a five-year high. As a result, the growth of home equity loans is slowing, especially home equity lines of credit (HELOCs) and adjustable rate mortgages (ARMs) due to their variable interest rates that adjust based on a standardized index (e.g., the Eleventh District Cost of Funds Index, United States One-Year Treasury Bill, or Wall Street Prime Index).

Now, credit line borrowers are paying off their home equity lines in increasing numbers by refinancing into fixed rate second mortgages. For example, at Wells Fargo, the number of borrowers prepaying their credit lines has climbed 50% this year. At Wachovia Corp., 40% of customers are choosing fixed-rate home equity loans, compared with 30% last year.

To attract new borrowers and keep current credit line customers from paying off their loans, lenders are "sweetening the pot." According to RealEstateJournal, U.S. Bank, a unit of U.S. Bancorp, this week introduced a home-equity loan with a rate of 5.99% that's fixed for 20 years; previous rates in most markets were 6.99% or higher. J.P. Morgan Chase & Co. has cut home equity rates for some borrowers on its lines of credit to 0.76% below the prevailing prime rate of 6.75%. Other banks are also offering enticements to keep customers from paying off their home equity lines of credit.

Adjustable mortgage rate borrowers are scrambling to refinance into fixed rate mortgages (FRMs) to lock into fixed interest rates before the next rate hike. Holden Lewis, senior reporter with Bankrate says, "Looking at mortgage rates, the 13-week average is higher than the 52-week average; the four-week average is higher than the 13-week average, and this week's rate is higher than the four-week average. The upward momentum is undeniable." And, according to Moody's Economy.com, more than $2 trillion of adjustable-rate mortgages come up for interest-rate resets in 2006 and 2007.

Maria Ny is a respected free-lance writer. She has written many articles that covered a broad range of subjects ranging from Bankruptcy Reform, Credit Repair to Subordinate Financing. Check out her informative articles online at Nationwide Home Equity Loans.

To learn more and get accurate rates quotes 2nd mortgages and home equity loans from loan professionals online please visit the 2nd loan resource center at Second Mortgage Loans or check out Home Equity Credit Lines.

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