How could HELOC rates change after the December Fed meeting?
Interest rates on home equity lines of credit (HELOCs) are traditionally lower than alternatives thanks to the home in question serving as collateral. This unique feature was a major benefit for borrowers in recent years as they saw interest rates surge on everything from mortgages to personal loans and credit cards. By comparison, HELOCs remained relatively cheap. And, in 2024, they've become more so, steadily dropping from an average rate of 10.16% on January 3 to 8.53% as of December 12.
But could they change again shortly? With a new inflation report out this week and the final Federal Reserve meeting of the year scheduled for December 17 and December 18, prospective borrowers may be wondering about any changes that are set to come for HELOC rates. Below, we'll break down how rates on this product could change even further after the next Fed meeting.
Considering a HELOC now? See what rate you could qualify for here.
How could HELOC rates change after the December Fed meeting?
In theory, HELOC interest rates could fall slightly after the December Fed meeting as another 25 basis point cut to the federal funds rate is widely expected. In reality, however, changes to HELOC rates may be more complicated and possibly muted, at least for the remainder of the year.
This is due, in part, to the fact that many lenders start adjusting their interest rate offers in advance of any presumed Fed action. This is partially why mortgage interest rates plunged in September, right before the Fed issued a larger-than-expected 50 basis point rate cut. Now, with the CME Group's FedWatch tool labeling a December rate cut as a 94.7% likelihood, borrowers may start seeing HELOC rates come down this week or early next week – but not much further in the immediate aftermath of the rate cut.
Still, that doesn't mean that HELOC rates won't continue their downward trend in January and the months that follow. They very likely may, if the economic impactors that have led to rates on the product declining this year continue trending in that direction. Fortunately, existing HELOC borrowers and prospective ones contemplating an application won't need to worry about timing the market to exploit additional rate drops. HELOC rates are variable and subject to change in the same direction as the broader rate climate. In other words, if you open a HELOC in early December and rates start declining later this month and into January, the rate on your line of credit will likely be lower in February. Borrowers won't need to take any refinancing action as they would with other products to secure that lower rate as the HELOC will adjust independently.
In other words: If you know you want to borrow with a HELOC and are confident that rates will continue to fall, now is a smart time to get your financing in order.
Get started with a low-rate HELOC online today.
What about reverse mortgages?
If you're unsure about a product with a variable rate but still want to tap into your accumulated home equity right now, a reverse mortgage could be a viable alternative worth exploring. With a reverse mortgage, the lender will pay you directly from your home equity. But you'll need to repay it if you die or if the home is sold. And, generally, this unique financing option will only be made available to homeowners 62 and older. Still, if you meet the eligibility criteria, it may be a smart way to access additional funding without having to worry about the evolving interest rate climate dynamics.
Learn more about your reverse mortgage options online here.
The bottom line
With HELOC interest rates less expensive than many other options and with the real possibility of those rates falling further in the weeks ahead, now could be a smart time to start researching your HELOC options. But borrowing from your home equity isn't risk-free, either, so it behooves homeowners to research all potential options, including reverse mortgages, to best determine which is most fitting for their unique financial circumstances.
