Will HELOC rates go down in 2024?

A home equity line of credit (HELOC) is a lending product that lets you borrow cash from your home's equity when you need it. Since these loans are backed by your home, they often come with lower interest rates compared to other loans. And, because they're revolving lines of credit, they offer the borrower quite a bit of flexibility. 

However, the interest rate environment isn't exactly conducive to borrowing at the moment. The Federal Reserve has increased its target federal funds rate 11 times in the last two years, driving the average HELOC interest rate up to 10.03%. 

So, if you've considered opening a HELOC, chances are you're wondering if rates are going to fall in 2024. And while rates could go lower in the year ahead, it may not be a wise idea to wait until they do to tap into your home's equity. After all, HELOC interest rates are usually variable and will typically fall alongside the federal funds rate if a rate reduction occurs. 

Find out the HELOC rates you could qualify for now. 

Will HELOC rates go down in 2024?

"I am of the belief rates for HELOCs will fall in 2024, as well as interest rates in general," says Mark Charnet, founder and CEO of American Prosperity Group. "This means the varying rate of a HELOC will benefit mortgagers as the rates fall."

The Federal Reserve adjusts interest rates in response to economic activity. When inflation rises, the Fed typically increases rates. As a result, borrowing becomes more expensive, and consumers and businesses spend less money. As such, demand for goods and services slows, leading to slowing price growth. 

However, the Federal Reserve has a tough job. Increasing interest rates to slow inflation and keeping them high for too long could lead to an economic recession. So, when economic activity slows, the Federal Reserve typically reacts by reducing interest rates. Here are a couple of signals that rates could fall in the future:   

Inflation is slowing

The most recent inflation data showed that prices were up 3.2% year-over-year in October. That's down from 3.7% in September, suggesting that the Federal Reserve's rate increases are having the desired effect. 

It's worth mentioning, though, that the Federal Reserve's target inflation rate is 2%, and that 3.2% is still higher than the Fed wants to see. Nonetheless, if inflation continues slowing, there's a chance that the Federal Reserve will react with a rate reduction at some point in 2024. 

Learn more about the benefits of a HELOC here. 

Job growth is also slowing

Inflation isn't the only measure of the state of the economy. Job growth, or lack thereof, is another effective way to gauge economic activity. After all, when consumers are spending money and inflation is high, companies need to hire more employees to keep up with demand. As economic activity slows, unemployment usually grows. 

Although there hasn't been any fast-paced slowing in the job market, the data does suggest that economic activity is slowing. According to the United States Bureau of Labor Statistics, since April, the number of unemployed Americans has grown by 849,000 to 6.5 million. Should this number continue to grow, it would likely give the Federal Reserve yet another reason to decrease interest rates. 

Why you shouldn't wait to get a HELOC

The simple fact is that HELOC interest rates are usually variable. So, if you need to access your home equity now, use a HELOC and if rates fall in the future, your rate will likely fall too. 

And, if you need a HELOC, chances are you shouldn't wait to access it. "Bottom line is this, the potential borrower should be in absolute need of this money in order to mortgage their future to get it, regardless of the initial interest rate," says Charnet.

In other words, if you're using a HELOC to pay off high interest rate credit card debt or to pay for necessary home repairs, you probably shouldn't wait to take care of those things. If you wait to pay off your high-interest debts, your financial hardship will only continue. If you wait to repair your home or your car, the damage could grow, leading to a higher cost to fix the problem in the future. A slightly lower interest rate likely isn't worth the cost of waiting. 

Don't wait. Tap into your home's equity today. 

The bottom line

There's a chance that HELOC interest rates will fall in 2024, but it can still make sense to take advantage of this loan product to access the money you need now. By opening a HELOC now, you get the money you need — and if rates drop in the future, the variable rate on your HELOC will likely drop too, resulting in lower interest and payments.