Richard Drury/Getty Images; Illustration: Austin Krege/Bankrate
Home equity rates had a mixed week. HELOCs continued to decline in 2024, according to Bankrate’s national lender survey. The $30,000 HELOC (home equity line of credit) fell 1 basis point to 8.52%, the lowest level in a year and a half, according to Bankrate’s national lender survey. In contrast, the average $30,000 home equity loan rose slightly to 8.41% (up 3 basis points).
HELOC rates have been trending downward since the Fed began cutting rates in September. The question is whether the decline will continue next year.
“It’s unclear at this point how much HELOC interest rates will fall in 2025,” said Melissa Cohn, regional vice president at William Labeis Mortgage. “The pace of rate cuts in the future will likely slow as the economy continues to perform well. The new administration’s policies on tariffs, immigration, and tax cuts are seen as inflationary, and the Fed may halt further rate cuts. .
“The Fed is responsive to the economy, and if the economy continues to perform well, there will be fewer layoffs than expected,” she added.
| the current | 4 weeks ago | 1 year ago | 52 week average | 52 week low | |
|---|---|---|---|---|---|
| HELOC | 8.52% | 8.56% | 10.11% | 9.14% | 8.52% |
| 15 year home equity loan | 8.48% | 8.48% | 9.08% | 8.69% | 8.37% |
| 10 year home equity loan | 8.55% | 8.53% | 9.07% | 8.73% | 8.46% |
| Note: Home equity rates in this study assume a line or loan amount of $30,000. | |||||
What is driving home interest rates up today?
While HELoan rates have declined in recent months, moving up and down a bit, HELOC rates have been steadily declining in 2024, and the pace accelerated with the start of fall. Their movement is currently driven by two factors. One is competition among lenders, with banks and mortgage companies trying to attract applicants with lower loan terms for a limited time, and actions by the Federal Reserve. The Federal Reserve cut interest rates by a quarter of a point on Dec. 18, its last meeting of the year.
“HELOC rates are sensitive to falling interest rates, and borrowers will see interest rates fall steadily, even faster than with fixed-rate home equity loans,” said Greg McBride, chief financial analyst at Bankrate. ” he said. “HELOC interest rates may be lower than credit card interest rates, especially if competition leads to introductory offers or credit card issuers are cautious about late payments and are slow to offer lower interest rates. It may decline quickly.”
What Affects Mortgage Interest Rates?
Several factors can affect home equity loan and HELOC interest rates.
The most important of these is changes in the Federal Reserve’s monetary policy. New home equity loans and HELOCs are tied to the prime rate, which tends to stay at the same level as the base rate adjusted by the Federal Reserve. As a result, borrowing costs for equity-based loans tend to rise when the Fed raises interest rates. And when you lower interest rates, the opposite happens.
The Fed’s actions affect the general direction of interest rates not only for mortgages but also for consumer loans and other financial services in general. However, because HELOCs and HELoans use your home as collateral, interest rates tend to be closer to current mortgage rates and are much cheaper than the interest rates charged on unsecured credit cards or personal loans.
Compare consumer loan interest rates
The Fed’s monetary policy influences overall interest rate trends and the interest rates advertised by interest rate lenders. However, the specific offer you actually receive on your particular HELOC or new HE loan will depend on additional factors, namely your creditworthiness, specifically your credit score, your debt-to-income ratio, and the value of the home you’re pledging as collateral. reflects.
