Homeowners have long benefitted from the ability to borrow against the equity in their property at an affordable rate. And, in many cases, a home equity line of credit (HELOC) can be an especially helpful tool, as it gives borrowers access to a line of credit to draw from as needed.

As the Federal Reserve began raising rates in the post-pandemic era due to surging inflation, home equity loan rates climbed along with costs of other debt — but even with the rate hikes, HELOCs remained more affordable than many other borrowing options, including credit cards.

The good news is that the Fed has shifted course and a cooler rate climate has already had a positive impact on HELOC rates. This trend is expected to continue, leaving many borrowers wondering just how low HELOC rates could fall this month. 

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How far will HELOC rates fall in October?

We’ve checked in with a few experts to get their take on where HELOC rates could head this month. That way, you may be better prepared to make informed borrowing choices. 

Current HELOC borrowers may see lower payments this month 

For borrowers who currently have a HELOC, October brings good news. That’s because HELOCs are typically variable-rate loans that are likely to be impacted if the Federal Reserve decides to cut rates at its upcoming meetings. 

“HELOCs are mostly tied to the prime rates. Because of this, that rate moves lockstep with the Fed’s rate movements,” says Kevin Lebowitz, president and CEO of Grayton Mortgage. “When the Fed cut rates by 50 basis points, the prime rate was lowered by 50 basis points as a response. This will start showing up in lower HELOC rates and payments this month since there’s a delay.”

Borrowers with variable-rate HELOCS don’t need to take any action to see borrowing costs drop. 

“If they have an adjustable rate HELOC, their rate will automatically go down as the prime rate goes down,” says Doug Perry, strategic financing advisor at Real Estate Bees. 

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HELOC rates for new borrowers may not decline much in October

While current borrowers may see financial relief this month, the news isn’t as positive for new borrowers hoping for a dramatic rate drop in October compared to current HELOC costs.

As of October 7, 2024, the average HELOC rate nationwide was 8.94%, which reflects a decline from the post-pandemic peak. Still, most experts think it will stay around that level for the remainder of the month rather than declining further.  

“I would plan on paying 8.00% to 9.00% for a home equity line in October if you have really good credit. Around 9.00% to 10.00% or even higher if your credit isn’t really good,” says Aaron Gordon, branch manager and senior mortgage loan officer at Guild Mortgage. 

Rates aren’t likely to move much this month because the Federal Reserve is not meeting again until November. Still, Gordon did say more banks may begin competing in the HELOC market in response to a rise in customer demand in the cooler rate climate. This could put some downward pressure on HELOC costs. 

“More competition means lower rates,” Gordon says. 

Bigger HELOC rate cuts could be coming soon

Although October may not bring the rate decline some would-be borrowers have been hoping for, that doesn’t mean it’s not coming. 

“Home equity lines will start to become cheaper as the Fed continues to lower rates,” Gordon says. 

Of course, there’s no guarantee that the Federal Reserve will drop rates further, but the Central Bank has made clear further cuts are on the horizon in 2024 and 2025. 

“While no one knows exactly what interest rates will be in the future and there are many factors that influence rates, investors can accurately understand the probabilities for future interest rates via FED futures contracts, and those clearly indicate the future direction of rates is down,” Perry says. 

According to Leibowitz, rumors suggest November’s cut will drop rates by 25 basis points. If that happens, “then the prime rate will be lowered by that amount,” he says. This, in turn, could result in a comparable decline in HELOC rates in November. 

Of course, while there’s ample reason to believe the predicted rate cut will go into effect, the Fed will still be paying attention to economic indicators to determine whether to move forward with planned cuts. 

“Going forward, the pace and size of future rate cuts must happen in a way that avoids reigniting inflation, says Kyle Enright, president of lending at Achieve.  

“To a lesser extent, the Fed is also likely keen to even the impression of attempting to influence the outcome of the November election,” Enright says.

If inflation begins surging again, the Fed could pause in its efforts to bring down the benchmark rate or even reverse course. 

The bottom line

The good news is that borrowers don’t necessarily need to wait for November in hopes of a rate cut if they want to get the best deals. “It doesn’t make sense for a homeowner who wants to tap into the equity in their home to wait for the FED to lower rates further,” Perry says. “If they have an adjustable rate HELOC, their rate will automatically go down as the prime rate goes down. They can get the money they need now while benefiting from lower rates in the future.”

Of course, since borrowers put their homes on the line by using them as collateral for a HELOC, it’s vital to ensure any loan is affordable both today and in the future. Shopping around for the best rates currently available and borrowing carefully can help them protect their homes while gaining access to an affordable line of credit they can use for important goals.