What to know about HELOC interest rates right now
When interest rates surged on a variety of borrowing products in the past few years, homeowners were able to turn to their home equity as a viable alternative. Interest rates on home equity loans and home equity lines of credit (HELOCs) were generally much lower than what would otherwise be found with a personal loan or credit card. And this dynamic has been further demonstrated in 2024, particularly with HELOCs. Interest rates on HELOCs are down almost two points from where they were in January, while rates on credit cards, for example, just recently surged to a record high.
Still, when using a critical asset like your home for extra financing, it's important to approach the borrowing situation carefully. And that means understanding the unique dynamics of HELOC interest rates in today's economic climate. Below, we'll explain what to know right now.
Start by seeing how low of a HELOC rate you could secure here.
What to know about HELOC interest rates right now
Considering a HELOC as your borrowing choice now? Here are three timely items to keep in mind about rates on this product:
HELOC rates are variable
The variable rate nature of HELOCs which was such a detriment when interest rates were steadily rising has now transformed into a beneficial feature. As the federal funds rate continues to cool – the latest cut is expected to be issued this week - HELOC rates will become less expensive. They're already down by almost two full percentage points after starting 2024 around 10%. So, not only can you secure a lower rate now, but it may become even cheaper in the weeks and months to come.
Get started with a low-rate HELOC here now.
Adjustments can come at anytime
If you already have a HELOC, you can generally expect rates to change on the line of credit each month. If you don't, however, it's critical to understand that lenders are constantly adjusting what rates they offer borrowers, even if those adjustments are often in minimal increments. They don't need to wait for a formal rate reduction from the Fed to start cutting their rates. And many won't, instead opting to price in presumed rate cuts in advance of any formal action. This means that prospective borrowers should start shopping around for lenders now versus waiting for the Fed to release its next rate-cut decision.
Waiting for a lower rate isn't necessary
With a home equity loan, waiting for a lower rate is understandable and even recommended for many potential borrowers. Since you'll be locked in with a fixed rate, it makes sense to wait to find the lowest option. But waiting for a lower HELOC rate isn't necessary. Even if you opened a HELOC at 8.53% today – and it dropped sometime in January – your lender is likely to drop the rate on your product as well. Waiting will only delay the financing you may need to consolidate high-rate debt or for major home repairs. So, if your credit is in good shape and you're considered a safe risk to borrowers, it's likely better to apply for a HELOC now, not later.
The bottom line
If you're looking for a relatively inexpensive way to borrow money in today's economy and don't want to delay by waiting for a lower rate, a HELOC could be the smart alternative. Rates are variable and likely to become lower as the interest rate climates continues to cool. This means that you should be constantly monitoring the rate climate for opportunities to capitalize but it also means that waiting for a lower rate isn't necessary if it will adjust independently anyway. For all of these reasons, then, it may make sense to start your HELOC journey now to get your funds ready for 2025.
