If you were looking for a cost-effective borrowing option for most of the last two years, your options were limited. Credit card rates soared over 20% while personal loan interest rates were over 10% (and they’re currently averaging close to 13%). Home equity loans and home equity lines of credit (HELOCs), however, largely remained in the single digits. And, now that the Federal Reserve has cut its federal funds rate, rates on these borrowing products are declining further. 

That said, it’s difficult to time interest rates with precision. As homebuyers saw in recent weeks, mortgage rates were low right after the Fed cut rates but have since increased by more than half a percentage point. Homeowners looking to access their home equity will want to avoid a similar scenario. But when will home equity loan interest rates fall again? While no one knows for sure, there are some factors to consider now that can better help answer this question.

See how low of a home equity loan rate you could lock in here now.

When will home equity loan interest rates fall again?

Home equity loan interest rates change daily so owners looking to secure the best rate would be well served by monitoring the market closely. It helps to look at recent rate changes as a guide for when they’ll fall again. 

The average home equity loan interest rate for a 10-year loan was 8.60% on September 11 and 8.55% for a 15-year loan, according to Bankrate. One week later, after the Fed cut rates, rates on these loans were 8.56% and 8.49%. But they’ve continued to decline in October, even without a formal Fed meeting. They’re now 8.46% and 8.38%, respectively. And if additional data is released to confirm expectations for another rate cut when the Fed meets again on November 6 and 7, rates could drop in anticipation of Fed action. In other words, a formal rate cut doesn’t need to be issued for lenders to preemptively price in that assumed reduction and, thus, offer borrowers lower rates. 

What data could affect rates? Unemployment figures could affect home equity loan rates. If unemployment numbers are poor, it could be a sign that more aggressive Fed rate-cutting action is required, thus leading to lower rates on these products. If the next round of inflation data shows a rise, that, too, could spur action. In addition to watching the market closely, pay close attention to the dates when this data is released (and the days that follow for market reaction).

In short: There is no definitive date in which home equity loan interest rates will fall again. This is a moving target but one in which borrowers should feel relatively comfortable as the overall rate climate appears to be on a gradual but encouraging decline.

Not sure what home equity loan rate you could lock in? Find out here.

The bottom line

Home equity loan interest rates are on the decline but predicting the exact date in which they will fall again is almost impossible. Instead, borrowers should follow the rate climate closely each day for an opportunity to lock in a low rate when listed. And they should consider the timely benefits of a HELOC. HELOC rates change independently each month based on market conditions, without the borrower needing to refinance. This is a major advantage now with rates on the decline and it’s something home equity loans can’t offer borrowers due to that loan’s fixed rate structure. 

As is the case with all home equity borrowing, however, it’s critical to only withdraw an amount that you can afford to repay with ease. Since your home functions as collateral in these borrowing circumstances, you could risk your homeownership if you fail to repay all that was deducted from your equity.