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Here’s how a 2024 Fed rate cut will affect home equity loans

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A looming interest rate cut could affect how much homeowners pay to borrow home equity.

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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. 

See how much home equity you could access online today.

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.



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Tajikistan nationals with alleged ISIS ties removed in immigration proceedings, U.S. officials say

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When federal agents arrested eight Tajikistan nationals with alleged ties to the Islamic State terror group on immigration charges back in June, U.S. officials reasoned that coordinated raids in Los Angeles, New York and Philadelphia would prove the fastest way to disrupt a potential terrorist plot in its earliest stages. Four months later, after being detained in Immigration and Customs Enforcement (ICE) facilities, three of the men have already been returned to Tajikistan and Russia, U.S. officials tell CBS News, following removals by immigration court judges. 

Four more Tajik nationals – also held in ICE detention facilities – are awaiting removal flights to Central Asia, and U.S. officials anticipate they’ll be returned in the coming few weeks. Only one of the arrested men still awaits his legal proceeding, following a medical issue, though U.S. officials speaking on the condition of anonymity to discuss the sensitive proceedings indicated that he remains detained and is likely to face a similar outcome. 

The men face no additional charges – including terrorism-related offenses – with the decision to immediately arrest and remove them through deportation proceedings, rather than orchestrate a hard-fought terrorism trial in Article III courts, born out of a pressing short-term concern about public safety. 

Soon after the eight foreign nationals crossed into the United States, the FBI learned of the potential ties to the Islamic State, CBS News previously reported. The FBI identified early-stage terrorist plotting, triggering their immediate arrests, in part, through a wiretap after the individuals had already been vetted by U.S. Customs and Border Protection, law enforcement sources confirmed to CBS News in June. 

Several months later, their removals following immigration proceedings mark a departure from the post-9/11 intelligence-sharing architecture of the U.S. government. 

Now facing a more diverse migrant population at the U.S.-Mexico border, a new effort is underway by the Department of Homeland Security, Department of Justice and the Intelligence Community to normalize the direct sharing of classified information – including some marked top-secret – with U.S. immigration judges. 

The more routine intelligence sharing with immigration judges is aimed at allowing U.S. immigration courts to more regularly incorporate derogatory information into their decisions. The endeavor has led to the creation of more safes and sensitive compartmented information facilities – also known as SCIFs – to help facilitate the sharing of classified materials. Once considered a last resort for the department, Secretary Alejandro Mayorkas has sought to use immigration tools, in recent months, to mitigate and disrupt threat activity.

The immigration raids, back in June, underscore the spate of terrorism concerns from the U.S. government this year, as national security agencies point to a system now blinking red in the aftermath of the Oct. 7 attacks by Hamas on Israel, with emerging terrorism hot spots in Central Asia. 

A joint intelligence bulletin released this month, and obtained by CBS News, warns that foreign terrorist organizations have exploited the attack nearly one year ago and its aftermath to try to recruit radicalized followers, creating media that compares the October 7 and 9/11 attacks and encouraging “lone attackers to use simple tactics like firearms, knives, Molotov cocktails, and vehicle ramming against Western targets in retaliation for deaths in Gaza.”

In May, ICE arrested an Uzbek man in Baltimore with alleged ISIS ties after he had been living inside the U.S. for more than two years, NBC News first reported. 

In the past year, Tajik nationals have engaged in foiled terrorism plots in Russia, Iran and Turkey, as well as Europe, with several Tajik men arrested following March’s deadly attack on Crocus City Hall in Moscow that left at least 133 people dead and hundreds more injured. 

The attack has been linked to ISIS-K, or the Islamic State Khorasan Province, an off-shoot of ISIS that emerged in 2015, founded by disillusioned members of Pakistani militant groups, including Taliban fighters. In August 2021, during the U.S. military withdrawal from Afghanistan, ISIS-K launched a suicide attack in Kabul, killing 13 U.S. service members and at least 170 Afghan civilians. 

In a recent change to ICE policy, the agency now recurrently vets foreign nationals arriving from Tajikistan, Uzbekistan and other Central Asian countries, detaining them while they await removal proceedings or immigration hearings.

Only 0.007% of migrant arrivals are flagged by the FBI’s watchlist, and an even smaller number of those asylum seekers are ultimately removed. But with migrants arriving at the Southwest border from conflict zones in the Eastern Hemisphere, posing potential links to extremist or terrorist groups, the White House is now exploring ways to expedite the removal of asylum seekers viewed as a possible threat to the American public. 

“Encounters with migrants from Eastern Hemisphere countries—such as China, India, Russia, and western African countries—in FY 2024 have decreased slightly from about 10 to 9 percent of overall encounters, but remain a higher proportion of encounters than before FY 2023,” according to the Homeland Threat Assessment, a public intelligence document released earlier this month. 

A senior homeland security official told reporters in a briefing Wednesday, that the U.S. is engaged in an “ongoing effort to try to make sure that we can use every bit of available information that the U.S. government has classified and unclassified, and make sure that the best possible picture about a person seeking to enter the United States is available to frontline personnel who are encountering that person.”

Approximately 139 individuals flagged by the FBI’s terror watchlist have been encountered at the U.S.‑Mexico border through July of fiscal year 2024. That number decreased from 216 during the same timeframe in 2023. CBP encountered 283 watchlisted individuals at the U.S.-Canada border through July of fiscal year 2024, down from 375 encountered during the same timeframe in 2023.

“I think one of the features of the surge in migration over recent years is that our border personnel are encountering a much more diverse and global population of individuals trying to enter the United States or seeking to enter the United States,” a senior DHS official said. “So, at some point in the past, it might have been primarily a Western Hemisphere phenomenon. Now, our border personnel encounter individuals from around the world, from all parts of the world, to include conflict zones and other areas where individuals may have links or can support ties to extremist or terrorist organizations that we have long-standing concerns about.”

In April, FBI Director Christopher Wray warned that human smuggling operations at the southern border were trafficking in people with possible connections to terror groups.

“Looking back over my career in law enforcement, I’d be hard-pressed to think of a time when so many different threats to our public safety and national security were so elevated all at once, but that is the case as I sit here today,” Wray, told Congress in June, just days before most of the Tajik men were arrested.

The expedited return of three Tajiks to Central Asia required tremendous diplomatic communication, facilitated by the State Department, U.S. officials said.  

Returns to Central Asia routinely encounter operational and diplomatic hurdles, though regular channels for removal do exist. According to agency data, in 2023, ICE deported only four migrants to Tajikistan.

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Here Comes the Sun: Ralph Macchio and more

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Actor Ralph Macchio sits down with Lee Cowan to discuss the sixth and final season of “Cobra Kai.” Then, Tracy Smith visits The Broad museum in Los Angeles to learn about Mickalene Thomas’ exhibition “All About Love.” “Here Comes the Sun” is a closer look at some of the people, places and things we bring you every week on “CBS Sunday Morning.”

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The Depraved Heart Murder – CBS News

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A surgeon is accused of drugging his girlfriend in order to control her. “48 Hours” contributor Nikki Battiste reports.

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