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What will happen to home equity loan rates after this week’s Fed rate cut?
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Interest rates are on the decline. Or at least the federal funds rate is. That seems to be the confusing but somewhat accurate interpretation in recent weeks after the Federal Reserve issued its first cut to the federal funds rate in more than four years in September. Cut to a range between 4.75% to 5%, the expectation was that rates on borrowing products would soon ease. While mortgage rates did temporarily drop in the month, they rose again by close to a full percentage point in October. And credit card interest rates, admittedly influenced by a complex series of factors besides just the federal funds rate, just hit a record 23% last week.
Against this backdrop, then, prospective home equity borrowers may be wondering about the future of home equity loan interest rates. Specifically, what will happen to home equity loan rates after this week’s Fed rate cut? That’s what we’ll break down below.
See what home equity loan interest rate you qualify for here.
What will happen to home equity loan rates after this week’s Fed rate cut?
The average home equity loan interest rate is 8.35% right now. And while that could certainly fall if the Fed issues a 25 basis point cut to the federal funds rate as expected on Thursday, it’s unlikely that home equity loan rates will change dramatically once the meeting has concluded. Here are three reasons why:
Lenders may have already made adjustments: A Fed rate cut this week is essentially a certainty (the CME Group’s FedWatch tool has it pegged at over 99%). Understanding this, many lenders may have already priced this presumed cut into what they offer borrowers. Remember that mortgage rates, for example, actually hit a two-year low before the Fed formally issued a rate cut in September. Home equity loan lenders may have done the same thing here.
See what home equity loan rate offers are available now.
The Fed doesn’t directly dictate home equity loan rates: Can the Federal Reserve influence home equity loan rates? Sure. But they can’t and won’t directly dictate what lenders can offer borrowers. So even if there is a 25 basis point reduction this week, don’t expect home equity loan rates to fall by the same margin. If there’s a 50 basis point cut, however, then rates may fall more significantly.
Market conditions also play a role: The Fed’s actions (or lack thereof) are only one component in a series of factors that affect home equity loan interest rates. Economic growth considerations, like the unemployment rate and inflation, also play a major role in what lenders ultimately offer borrowers. And figures there have been mixed lately with unemployment in October poor while inflation continues to drop closer to the Fed’s preferred 2% target. With these additional factors moving in opposite directions, then, it may negate any additional significant reductions in home equity loan rates, at least temporarily.
The bottom line
Home equity loan rates, in theory, could fall after this week’s Fed rate cut. But that drop is unlikely to be significant and, for many borrowers, that cut may already be preemptively priced in with their current lender offers. Still, the rate climate is evolving and home equity loan rates are significantly cheaper than many alternatives. So it may still make sense to pursue this unique borrowing option now while looking for an opportunity to refinance your loan to a lower rate in the future.
Have more home equity loan questions? Learn more here.
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Leonard Glenn Francis, a former defense contractor convicted for masterminding an unprecedented bribery and fraud scheme targeting the U.S. Navy, was sentenced Tuesday in federal court to 15 years in prison. He was ordered to pay $20 million in restitution and a $150,000 fine, the Department of Justice announced.
Francis, known as “Fat Leonard,” pled guilty in 2015 to the bribery and fraud charges, but fled the U.S. in 2022 leaving his GPS ankle monitoring bracelet in a water cooler just days before he was to be sentenced. The U.S. Marshals Service told CBS News Francis was detained on an Interpol red notice at Simon Bolivar International Airport in Venezuela while boarding a flight to Cuba.
He was returned to the U.S. last year as part of a large prisoner swap deal with Venezuela. Ten American detainees were released in the 2023 deal in exchange for the Biden administration freeing Alex Saab, a Colombian-born businessman and close ally of Venezuelan President Nicolás Maduro who was facing money laundering charges.
U.S. Marshals Service via AP
In a 2015 plea agreement, Francis, the Malaysian owner of a ship servicing company in Southeast Asia, identified seven Navy officials who had accepted bribes and acknowledged paying off officials with hundreds of thousands in cash, as well as luxury goods worth millions.
He supplied them with prostitutes and Cuban cigars, luxury travel, Spanish suckling pigs and Kobe beef. Officials received spa treatments, top-shelf alcohol, designer handbags, leather goods, designer furniture, watches, fountain pens, ornamental swords and handmade ship models, according to court documents.
In exchange, officers gave him classified information and even redirected military vessels to lucrative ports for his Singapore-based ship servicing company. Francis, according to prosecutors, overcharged the U.S. military by $35 million for his company’s services.
Over 30 Navy officers and contractors have either been convicted or pleaded guilty to charges related to Francis’ services.
On Tuesday, U.S. District Judge Janis L. Sammartino sentenced Francis to a 164-month sentence for bribery and fraud and 16 months for failing to appear, to be served consecutively.
“Leonard Francis lined his pockets with taxpayer dollars while undermining the integrity of U.S. Naval forces,” said U.S. Attorney Tara McGrath in a statement. “The impact of his deceit and manipulation will be long felt, but justice has been served today.”
Francis, 60, was initially arrested in San Diego on September 16, 2013, and remained in pretrial custody until December 18, 2017, when the court granted his request for release pending sentencing due to a medical condition, the Department of Justice said. Francis served four years and three months in custody before he was released on bond and ordered into house arrest. He remained on bond under the supervision of U.S. Pretrial Services for almost five years, from December 17, 2017, until he escaped.
“Mr. Francis’ sentencing brings closure to an expansive fraud scheme that he perpetrated against the U.S. Navy with assistance from various Navy officials. This fraud conspiracy ultimately cost the American taxpayer millions of dollars and weakened the public’s trust in some of our Navy’s senior leaders,” Kelly P. Mayo, the director of the U.S. Department of Defense Office of Inspector General said in a news release on Tuesday.