After more than four years of repeatedly raising interest rates, the Federal Reserve lower interest rates We started September with a 50 basis point cut, larger than expected. But that was just the beginning, with the Fed continuing to cut interest rates this week. 25 basis point reduction. Another reduction in the same increase is expected at the Fed’s December meeting. While these cuts have brought new borrowers into the fold, they underscore something mortgage borrowers may have already noticed: interest rates It decreased all year.

This has been especially noticeable to those who benefit from them. home equity through a home equity line of credit (HELOC). These products exist variable interest ratesThis could be problematic when interest rates are rising, as in 2022 and 2023, but is advantageous now as the broader interest rate environment cools again. So exactly how much have HELOC interest rates fallen this year? So how much lower can they fall? This is what we will examine below.

See how low a HELOC interest rate you might qualify for here.

Here’s how much HELOC interest rates have dropped this year

HELOC interest rates are traditionally lower than interest rates available on credit cards and personal loans, thanks to the home in question serving as critical collateral. But they didn’t start 2024 in a particularly attractive position; On January 3, 2024, they recorded a growth of 10.16%. bank rate.

But they have fallen significantly since that point, albeit with ups and downs. As of January 10, 2024, the average was 9.32%, and as of February 7, it was 9.12%. Rates fell to just under 9% in March but rose again to 9.89% in May as the fight against inflation appeared more problematic than many expected. However, as inflation fell in the months that followed, so did HELOC rates. They rose again to just under 10% in early September but have fallen significantly since then with two Fed rate cuts.

Currently, the average HELOC rate is just 8.70%, nearly a point and a half lower than it was in January. And if inflation If they continue to decline (October data will be released on November 13), HELOC rates will likely continue to decline. And if the Fed makes a final 2024 rate cut in December, which it almost certainly will, rates will likely end the year two percentage points lower than where they started.

However, it was noted that it is almost impossible to predict future interest rate changes with certainty. If you know you need financing then and are happy with current rates today, it makes sense to apply for a HELOC now.

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Why might a HELOC be better than a home equity loan now?

Currently, mortgages have a slightly lower rate compared to HELOCs (8.41% versus HELOC’s 8.70%). But HELOCs are better positioned to take advantage of today’s cooling rate environment thanks to their variable interest rate. Mortgage loan interest rates are fixed, which means borrowers refinancing them (and pay 1% to 5% of the loan amount in closing costs to get a lower rate.

So borrowers who understand this dynamic and the real potential that rates will continue to fall through 2025 may want to take a calculated risk by opening a rate cut. HELOC instead of mortgage. This won’t be the right approach for everyone, but if you want to make the most of multiple future interest deductions, a HELOC offers you the most convenient way to do so.

In conclusion

HELOC interest rates have fallen by about a percentage point and a half so far this year, and many experts predict they will fall even further in December and into 2025. To take advantage of today’s changing rate climate, a HELOC may be the preferred option. Also avoid the temptation of over-indebtedness, as your home acts as collateral here and you could jeopardize your property if you fail to repay the full loan limit.

Have other HELOC questions? Learn more here now.