What's the home equity loan interest rate forecast for November 2024?
High interest rates have made it hard for consumers to borrow money in recent years. And credit card rates? Those have been even worse. Fortunately, the tides have finally started to turn, and borrowing has recently become more affordable again.
Home equity interest rates, for example, have seen a notable dip over the last month or so, giving homeowners an opportunity to turn their home equity into cash without breaking the bank. Will those rates continue to cool, though, and is now a good time for you to borrow from your equity? Below, we'll break down what some experts are predicting for this November.
Start by seeing how low of a home equity loan rate you could qualify for here.
What's the home equity loan interest rate forecast for November 2024?
Home equity loans and home equity lines of credit (HELOCs) are the two main ways to borrow from your home equity. But the two aren't one and the same.
While home equity loans are fixed-rate products offering a lump sum of cash, HELOCs are lines of credit you can pull from over time. They also typically have variable interest rates that fluctuate. For this reason, rates on these two products don't follow the same trendlines.
HELOC rates are tied to the prime rate, which is based on the federal funds rate set by the Federal Reserve.
"The main driver of rates for these instruments will be movements by the Fed," says Kevin Leibowitz, a mortgage broker at Grayton Mortgage. "If and when the Fed continues to cut rates, the rates on these mortgages will fall."
As of now, the CME Group's FedWatch Tool shows high chances of a Fed rate cut at both of the bank's remaining 2024 meetings. This would likely mean a notable reduction in HELOC rates as well — both newly issued ones and existing ones (since HELOC rates typically adjust monthly).
Get started with a HELOC online now.
Long-term rates could be different
Home equity loan rates, however, aren't directly tied to the prime or Fed rate. Though the Fed's moves do trickle down to these and other long-term mortgage rates, the effect isn't direct or immediate. So on these loans, the forecast isn't as clear. Often, rates on these products will drop before the Fed makes any moves — in anticipation of them — rather than after they occur.
That's what happened in August when experts largely predicted the Fed would adjust its policy at the upcoming September meeting. During that time, rates fell from nearly 7% to the low 6% range, only to rise back up once the Fed made its announcement.
"For a fixed equity loan, the trend follows what traditional purchase rates are doing," says Rose Krieger, a senior home loan specialist at Churchill Mortgage. According to a forecast from the Mortgage Bankers Association, those are expected to fall slightly to 6.2% (down from today's 6.5%), by year's end.
Keep in mind that home equity loan rates are typically a few points higher than traditional mortgage rates, since they come with more risk for the lender. In late October, the average rate on a home equity loan was about 8.35% — a little less than two points over the 30-year mortgage rate, according to Freddie Mac.
Act now to be safe
Some experts estimate that home equity rates will generally drop by anywhere from 0.25% to 0.50% over the next few months, though economic data, the election and other factors could throw that off, he says.
Is it worth waiting around to see if those drops come to fruition, though? Likely not, experts say.
"I generally coach my clients to act on a needs basis," Leibowitz says. "If they need to do something now, then do it. Waiting for lower rates is dangerous."
The best thing you can do is to proceed with a home equity loan or HELOC when the numbers work for you. If you can get a rate and payment that are within your budget, and you're able to achieve the financial goals you're looking to tackle, then it's probably time to make your move.
"Most long-term projections will show that whether you decide to invest on the 'worst possible' day to enter a market or the 'best possible' day to enter a market, the long-term outcomes tend to be fairly close over a long time period," says John Aguirre, a mortgage originator at Loantown. "Given the recent trend of interest rates, moving quicker is better than later. We are hovering around the best interest rates in the past two years, and the chances that we break through to even lower rates is a risky proposition."
