If you have been looking for an inexpensive way to borrow money in recent years and have been put off by the high interest rates associated with credit cards and personal loans, you may have considered using your home equity. Now, with the first cut to the federal funds rate issued in September after more than four years, and another anticipated for when the Federal Reserve meets again this week, home equity borrowing could become even cheaper. 

This dynamic is already being felt with home equity lines of credit (HELOCs). Rates on this product, which works like a revolving line of credit, dropped to an average of 8.68% last week, the lowest they’ve been all year. Borrowers considering this particular product, then, may be wondering about the potential for HELOC rates to fall even further this November. Below, we’ll break down what to expect – and what to do about it.

Start by seeing what HELOC rate you could qualify for here.

How much further could HELOC rates drop this November?

While it’s impossible to determine with certainty how much further HELOC rates could drop this November, it’s not hard to see rates on this product falling by approximately 25 basis points. That is, after all, what most experts expect the Federal Reserve to cut the federal funds rate by this week. And while HELOC rates are unlikely to move directly in response, they will follow a similar downward trend. That noted, some lenders start pricing in these presumed rate reductions in advance of a formal issuing from the Fed. So what you see offered at the start of the month may not be materially different from what’s offered later in November.

Another factor to consider is that the October unemployment report was subpar, showing an addition of just 12,000 jobs in the month. If the Fed uses that as a motivator to reduce its federal funds rate, a reduction of another 50 basis points could be possible, at which point HELOC rates would also follow. A 25 basis point reduction, in other words, may already be priced in, but a bigger-than-expected cut to the rate this week could lead to a similar drop in HELOC rates.

But the good news is that borrowers don’t have to wait for these cuts to act. That’s because rates on HELOCs are variable and adjust independently each month with no action required on behalf of the borrower. So if the HELOC rate you secure right now is 8.68%, don’t be surprised if you see it drop to 8.43% or even lower in December. 

Get started with a HELOC online today.

What about home equity loan rates?

Home equity loan interest rates won’t be immune from a downward trend and are also likely to fall as additional rate reductions are issued (and they’re already lower than HELOCs at just 8.35%). The issue with home equity loan rates right now, however, is that they’re fixed. That’s an advantage when rates are on the rise but problematic when they’re on the decline as they appear to be right now.

With a home equity loan, you’ll need to refinance to lock in the lower, prevailing rate while HELOCs will just fall to the new one on their own. So carefully calculate the benefits of a slightly lower home equity loan rate now versus the long-term benefits of a variable HELOC rate to better determine which is right for you.

The bottom line

HELOC interest rates are low and likely to become lower this month. So start shopping around for lenders to find one offering the best rates and terms. Get your paperwork in order so you’re best prepared to act when you find a lender you want to work with. Since you don’t need to wait for rates on HELOCs to fall it makes sense to open one now and position yourself to enjoy additional savings in the months to come. Just remember that your home serves as collateral in these borrowing exchanges so be cautious with how much you ultimately utilize as you could risk your homeownership if you fail to repay the principal and interest in full.