HELOC interest rates fall to new 2024 low: Why you shouldn't wait to apply
The steady decline in home equity line of credit (HELOC) interest rates continued this week. According to new data released by Bankrate, the average rate on a $30,000 HELOC fell to 8.55% as of December 4. That's the lowest it's been in all of 2024 after starting at 10.16% on January 3, 2024, making now a great time to access your home equity with this unique product. And with the average home equity amount hovering around $320,000 currently, there's likely plenty of money to utilize.
Still, with the steady decline in interest rates demonstrated throughout the year, many homeowners may find it tempting to wait to apply for a HELOC in 2025, when rates may be even lower. For many borrowers, however, waiting could prove to be a costly mistake. Below, we'll explain why you shouldn't wait to apply.
Start by seeing how low of a HELOC rate you'd be eligible for here.
Why you shouldn't wait to apply for a HELOC
Don't let the temptation of prospective rate drops tempt you from applying for a HELOC now. Here are three big reasons why it's worth securing right away:
There's no guarantee that rates will continue to decline. Inflation ticked up in October (the latest report available) to 2.6%. That's more than half a percentage point above the Federal Reserve's desired 2% goal. And if the next inflation report released on December 11 shows another increase, it could cause fed rate cuts to be paused. While the Fed doesn't directly dictate what lenders offer homeowners in terms of HELOCs, it does greatly impact it. Waiting, then, for additional rate cuts that may not come is a risk many borrowers may be better off avoiding.
Compare your current HELOC options online today.
HELOC rates adjust independently. What happens if you apply and secure a HELOC now … and rates fall in February or March? Borrowers won't need to worry about this scenario as their HELOC interest rate is variable and, thus, it will adjust independently each month. So if rates decline in 2025, so will your HELOC rate. On the other hand, if rates rise, so will your HELOC rate. It makes sense, then, to apply now while rates and payments are still manageable, as no one can predict with certainty where, exactly, HELOC rates will be in the new year.
Your financial needs may be urgent. If you're planning on using your HELOC for some optional home projects and renovations, then waiting until 2025 may not be problematic. However, if you're planning on using it to improve your financial health by consolidating high-interest credit card debt, for example, delaying isn't wise. Credit card interest rates just soared to an average of 23.37% – a record high. So if you can consolidate this debt with a HELOC rate of 8.55% (almost three times lower) it makes sense to do so right away.
The bottom line
Timing is key when borrowing money, especially when doing so with a vital asset like your home equity. If you fail to repay all that you've withdrawn you could risk losing your property. But delaying action for an optimal time is risky, too. Instead, weigh the unknown benefits of delaying a HELOC application versus the immediate ones of acting now, especially considering how far HELOC rates have already dropped in 2024. For many homeowners, it may make sense to start shopping for lenders today.
