Richard Drury/Getty Images; Illustration: Austin Krege/Bankrate
New month, new low for home equity rates: A $30,000 HELOC (home equity line of credit) fell to 8.55 percent, a 52-week low, according to Bankrate’s national lender survey. Meanwhile, home equity loans averaging $30,000 fell 1 basis point to 8.40%.
“Home equity loans and low-interest HELOCs can be very beneficial to buyers,” said Cori Sassower, founder and principal agent of the Cori Sassower Team, a real estate firm based in New York. “Many of the homes we have on the market are homes that need a lot of work, and many have been sold by their original owners. The costs are very high, so home equity loans and good interest rates can be a great way for buyers to bridge the gap.”
| the current | 4 weeks ago | 1 year ago | 52 week average | 52 week low | |
|---|---|---|---|---|---|
| HELOC | 8.55% | 8.70% | 10.04% | 9.20% | 8.55% |
| 15 year home equity loan | 8.48% | 8.42% | 9.13% | 8.72% | 8.37% |
| 10 year home equity loan | 8.55% | 8.50% | 9.09% | 8.75% | 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. In early November, the central bank cut interest rates for the second time in a row, this time by a quarter of a point, reflecting efforts to rein in inflation. The last Fed board meeting of 2024 will be held on December 17-18.
Greg McBride, chief financial analyst at Bankrate, said: “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. ” 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 drop quickly.”
The results of the 2024 presidential election are also increasing borrower interest, particularly in HELOCs used for home improvements. “A lot of people were sitting on the sidelines waiting to see what the election and interest rates were going to be,” said Tyson Blackburn, chief lending officer at Quorum Federal Credit Union, an online lender serving members across the country. Demand has increased significantly. ”
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, when the Fed raises interest rates, borrowing costs for equity-based loans tend to rise. 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 posted interest rates. However, the individual offer you receive from a lender for a particular HELOC or new HELoan will depend on additional factors, namely your creditworthiness, specifically your credit score, your debt-to-income ratio, and the value of the home you are pledging as collateral. It is reflected. .
