The long-awaited cut to the federal funds rate was issued in September. After years of rate hikes and higher borrowing costs, the Federal Reserve finally cut its benchmark rate to a range between 4.75% and 5%. That was largely due to a cooling in the inflation rate which, if it continues, could lead to additional rate cuts in November and December, too. While this is a benefit for borrowers, expectations for substantial relief should be measured, particularly for those looking to borrow from their home equity.

In recent years, many have chosen home equity loans and home equity lines of credit (HELOCs) as their cost-effective borrowing preference. But waiting for interest rates to fall further before acting could prove to be an expensive mistake. Below, we’ll detail three reasons why homeowners shouldn’t wait for home equity loan rates to drop further.

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Why you shouldn’t wait for home equity loan rates to drop further

Are you ready to borrow from your home equity but aren’t sure if you should act or wait? Here are three major reasons why you shouldn’t wait for home equity loan rates to fall any further:

Rate declines will be gradual

The average home equity loan interest rate as of October 2 is 8.39%. That’s down from the 8.75% it was sitting at in the spring, but not in a major way. That 0.36% reduction, after all, is after a half a percentage rate cut was already issued, underlining the gradual (and, some would argue, slow) pace in which home equity loan rates are declining. While rates are expected to fall in the weeks and months ahead, they’re not expected to drop by a dramatic extent. Plus, if any new economic data released in October or November proves problematic, rate cuts could be paused as a response. So don’t wait for that to happen.

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Your financial needs can’t wait

If you’re seriously considering tapping into your home equity, which is likely one of your biggest financial investments, then chances are high that you need money now. If this is the case, your financial needs may not be able to be delayed long enough – nor should they – to secure an interest rate that’s just a few basis points lower than what you can already get right now. So if you’re looking for a home equity loan to consolidate credit card debt, for example, which is currently hovering near record rates, it makes sense to open a home equity loan now to do so. 

You’ll miss this year’s tax deduction

Interest paid on a home equity loan is tax deductible if the borrower uses the funds for qualifying home repairs or renovations. So if you’re planning on using your home equity loan for these reasons this fall it makes sense to act now. If you wait until 2025, you’ll then need to wait until 2026 to get this tax deduction. But if you open a home equity loan in the final months of 2024 – and use a portion of it – you’ll be eligible to write off that interest when you file your tax return in the spring.

The bottom line

The decision to wait for interest rates to fall is always a precarious one. This is especially true when tapping into your home equity. Because rate declines are expected to be gradual, and because your current financial needs are likely urgent, it makes sense to be proactive now. Plus, if you wait, you’ll delay what could be a substantial tax deduction. So weigh the costs of waiting versus the benefits of acting now. For many, it may be beneficial to get started with a home equity loan today.

Have more questions? Learn more about your best home equity loan options here.