Here's the home equity loan interest rate forecast for September 2024
Thinking about tapping into your home's equity? Recent economic shifts could spell good news for home equity borrowers. With inflation cooling and the Federal Reserve hinting at rate cuts, home equity line of credit (HELOC) and home equity loan rates might become more attractive.
We asked top lending and real estate experts to weigh in on where home equity rates are headed this fall. While most see a downward trend, it's not a guarantee. Let's explore where these rates could go in September and what that could mean for you.
Ready to tap into your home's equity? Find out what rates you could qualify for here.
Here's the home equity interest rate forecast for September 2024
Home equity interest rates tend to follow the Fed's moves linearly. "If the Fed cuts rates by a quarter point, you'll likely see HELOC rates drop by a quarter point as well," says Jerimiah Taylor, chief real estate officer at Movoto.
Federal Chairman Jerome Powell's recently indicated policy shift and declining bond rates are driving this anticipated downward trend in home equity loan rates.
Tim Rasmussen, CEO of Community First Federal Credit Union, agrees with this outlook.
"I see a 25-basis point cut in September [and] possibly another full point by December," Rasmussen says. He cites the downward pressure on the 10-year bond rate as a key indicator.
Though the consensus leans toward a drop, markets can be surprising. Let's look at three possible scenarios for home equity loan rates this month and how they could affect your financial decisions.
Learn more about the best home equity borrowing options available to you here.
Home equity loan interest rates will drop
A few factors point to a decrease in home equity interest rates this month.
First, Powell recently suggested probable rate cuts at the next Fed meeting in mid-September. If the Federal Reserve decides to lower rates, "it's a good indicator that they feel the economy is slowing and steering away from a recession, which in turn can result in lower rates for consumers," says Ward Morrison, president and CEO of Motto Mortgage.
Consumer sentiment is another consideration. Morrison points out that confidence in economic stability and a widespread belief in declining rates can influence the yields for the 2-year and 10-year treasury. This could push rates in a favorable direction. However, he tempers expectations.
"I don't expect that drop to exceed 25 to 50 basis points," Morrison says.
But while home equity rates could be heading south this month, don't expect a free fall. You might not see immediate changes in your borrowing options because, according to Rasmussen, "the drop will be slow at first. Financial institutions are slow to respond to falling rates."
What this means for you: Lower rates typically mean you'd pay less interest over the life of a new home equity or HELOC loan. This could make larger home improvement projects or debt consolidation more manageable.
Home equity loan interest rates will stay the same
Another possibility? Home equity loan rates remain stable this September.
Morrison outlines what this scenario would require: "Everything happening in the market [would have to be] aligned with predictions set by other prognosticators."
These predictions, he explains, involve factors such as employment rates, job openings and losses, layoffs and overall economic stability.
What this means for you: Stable rates give you time to compare offers without feeling rushed. But if you're waiting for a drop, you might need to reassess your plans. Determine whether current rates still allow you to meet your financial goals.
Home equity loan interest rates will increase
"In the off chance that [home equity loan] rates go up in September, [it would likely be] due to information in [upcoming] economic reports," says Morrison.
Signs of a recession or unexpected unemployment spikes could trigger higher risk premiums on home equity lines of credit.
What this means for you: If rates increase, borrowing against your home equity may become more expensive. "A rising rate could slow borrowing. The economy is struggling, and most borrowers are near limits at current rates," says Rasmussen. This might hinder your plans for home improvements or debt consolidation. If you're considering a HELOC, you might want to act sooner rather than later if you believe rates will rise.
The bottom line
Rates on home equity loans may go down in September, but no one is certain. "Regardless of rate fluctuations, using your home's equity is an effective way to improve your home and increase its value … or take control of your financial situation," Morrison says.
Speak with a handful of lenders to understand your options if you've been thinking about a home equity loan or HELOC. They'll help you compare loan terms, assess your home's equity and find out if tapping into it matches your financial goals.
