Inflation has been cooling in recent months, and if it continues on that path, it could mean lower interest rates are upcoming. Once inflation gets closer to the Federal Reserve’s 2% goal, it’s likely to reduce its federal funds rate, which would lower rates for American borrowers, too.

The timing of that rate cut is unclear, but according to the CME Group Fed Watch tool, it could be as early as September. What would that rate mean for home equity borrowers, though? And when would those changes hit? We asked some experts for their thoughts on how a Fed rate cut could affect home equity loans.

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How a 2024 Fed rate cut will affect home equity loans

Here’s what the experts we spoke to predicted for home equity loans, should the Federal Reserve proceed with a cut to the federal funds rate.

The Fed will only cut rates slightly

In its June Summary of Economic Projections, the Fed indicated it will likely only reduce rates by about 0.25% this year. And the experts we spoke to agree that this is probably where the Fed will land by year’s end.

“The Federal Reserve has made it clear that it needs to see more data supporting an inflation trend towards its long-term goal of 2% before making any meaningful changes to monetary policy,” says Kelly Miskunas, senior director of capital markets at online mortgage lender Better.com.

The CME Group Fed Watch tool shows the possibility of further rate cuts this year, but the numbers change often. If inflation drops at a faster clip than it has in recent months, there’s a chance those extra cuts could happen. The Fed meets next at the end of July. 

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Home equity interest rates will drop, too

Experts say if the Fed drops its rate, home equity rates will fall, too. They’ll fall quickest on home equity lines of credit (HELOCs), as these have variable interest rates that are directly tied to the prime rate. When the Fed rate declines, the prime rate does, too, so HELOC rates fall in step. 

That means new HELOC will see the impact immediately, and borrowers who already have HELOCs will see it shortly after.

“Outstanding HELOCS typically are set monthly,” says Kevin Leibowitz, a mortgage broker at Grayton Mortgage in New York. “It will take 30 to 45 days for those mortgages to reset.”

For home equity loans, though, the story is a little different. Most borrowers with existing home equity loans won’t see their rate change at all (those are usually fixed-rate loans, so the rate stays constant the entire term unless refinanced). New home equity loan borrowers, though, will see lower rates when they take out their loans. It likely won’t be a huge decline, though. 

“The Federal Reserve tries to be overly transparent with their intentions for future policy decisions to not spook broader markets,” Miskunas says. “For this reason, the market will typically have priced in the Fed’s next action before it occurs.”

Should you act now or wait?

With rates poised to fall, you might be tempted to wait before taking out a home equity loan or HELOC. Whether that’s smart or not depends on your goals (do you need the money for something important right now?), as well as what type of product you’re considering.

“Waiting for a lower rate for most HELOCs is not necessary because they are floating, so when the rates drop, your loan rate will automatically fall,” says Mason Whitehead, branch manager at Churchill Mortgage in Dallas. “Just ensure that your loan does not have a floor rate, which means it will never go below a certain rate, typically the start rate.”

For home equity loans, waiting might work — but there’s really no guarantee. And if you need the cash for something now, acting sooner may be necessary. 

“Since it is impossible to predict the future path of interest rates, customers who are looking to tap into their home equity today should act, instead of trying to time the market,” Miskunas says. “Borrowers can always look to refinance high-cost debt if interest rates decline in the future.”

How to get a lower rate

If you’re applying for a home equity loan or HELOC soon, there are steps you can take to minimize your interest rate. To start, improve your credit score. The higher your score, the lower your rate will likely be. You can also reduce your debts or increase your income, as this lowers your debt-to-income ratio (DTI) and the risk you pose to a lender. A lower DTI can also get you a lower rate.

Finally, talk to a loan officer or mortgage broker early in the process. They can help you prepare for your application and guide you on how to get the best rates. 

Find out more about your home equity borrowing options here today.

A French court ruled on Monday that the American man accused of sexually assaulting a Pennsylvania college student in 2013 and later sending her a Facebook message that said, “So I raped you,” can be extradited to the United States.

Ian Cleary, 31, of Saratoga, California, was detained in April in the city of Metz in northeastern France after a three-year search. He has been held in custody pending extradition proceedings since his arrest.

The Court of Appeal in Metz said that Cleary can be extradited. When asked if he wished to be extradited or not, in line with French law, Cleary refused, prosecutors said in a statement Monday. His refusal may delay the extradition process, but it won’t stop it.

The ruling is final. Cleary’s case is now the responsibility of the French Justice Ministry, which must prepare and submit the extradition order for the French prime minister. While he awaits the prime minister’s signature, Cleary remains detained in France.

Justice Ministry officials didn’t immediately respond to a request for comment.

Cleary had been the subject of an international search since authorities in Pennsylvania issued a 2021 felony warrant in the case weeks after an Associated Press story detailed the reluctance of local prosecutors to pursue campus sex crimes.

The arrest warrant accuses Cleary of stalking an 18-year-old Gettysburg College student at a party, sneaking into her dorm and sexually assaulting her while she texted friends for help. He was a 20-year-old Gettysburg student at the time but didn’t return to campus.

The Gettysburg accuser, Shannon Keeler, had a rape exam done the same day she was assaulted in 2013. She gathered witnesses and evidence and spent years urging officials to file charges. She went to authorities again in 2021 after discovering the Facebook messages that seemed to come from Cleary’s account.

“So I raped you,” the sender had written in a string of messages.

“I’ll never do it to anyone ever again.”

“I need to hear your voice.”

“I’ll pray for you.”

The AP doesn’t typically identify sexual assault victims without their permission, which Keeler has granted. The accuser’s lawyer in Pennsylvania, reached on Monday, declined to comment on the development.

According to the June 2021 warrant, police verified that the Facebook account used to send the messages belonged to Ian Cleary. Adams County District Attorney Brian Sinnett, who filed it, declined to comment on developments when reached Monday.

After leaving Gettysburg, Cleary earned undergraduate and graduate degrees from Santa Clara University, near his family home in California, worked for Tesla, and then moved to France for several years, according to his website, which describes his self-published medieval fiction.

Keeler, originally from Moorestown, New Jersey, stayed on to graduate from Gettysburg and help lead the women’s lacrosse team to a national title.

By 2023, two years after the warrant was filed, Keeler and her lawyers wondered how he was avoiding capture in the age of digital tracking. The U.S. Marshals Service thought he was likely overseas and on the move, even as he was the subject of an Interpol alert called a red notice.

Across the U.S., very few campus rapes are prosecuted, both because victims fear going to the police and prosecutors hesitate to bring cases that can be hard to win, the AP investigation found.

Keeler, when the warrant was issued, said she was grateful, but knew it only happened “because I went public with my story, which no survivor should have to do in order to obtain justice.”