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Does a HELOC make sense with inflation rising again? What experts say
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Borrowing against the equity in your home has long been an affordable way to access funds. However, home equity loans and home equity lines of credit (HELOCs) became more expensive over the past several years as inflation surged in the post-pandemic era.
As inflation began to cool in 2024, those hoping to get a loan against their equity saw signs of potential relief in the interest rate forecast. Unfortunately, this was short-lived as inflation began to tick back up and home equity and HELOC loan rates once again began to climb.
With inflation rising slightly in October, many homeowners are left wondering if a HELOC makes sense during these turbulent economic times — especially since, unlike a home equity loan, HELOCs have variable interest rates.
To help you decide if a HELOC could be the right choice, we asked experts to weigh in about this borrowing method under current economic conditions.
See what HELOC interest rate you could qualify for here now.
Does a HELOC make sense with inflation rising again?
The good news for would-be borrowers is that most experts believe HELOCs are still a good choice right now — even though rates remain elevated above the recent historic norms that persisted between the end of the 2008 recession and the start of the post-COVID era.
“The equity gained in your home can be a useful asset in serving your short or long-term financial goals,” according to Fred Bolstad, head of retail home lending at U.S. Bank. This equity acts as collateral for your HELOC, reducing the risk to lenders of providing you with a loan, thus opening the door to one of the most affordable borrowing options available.
“Rates on HELOCs are still lower than alternatives like personal loans or credit cards,” explains Aaron Craig, VP of Mortgage and Indirect Sales for Georgia’s Own Credit Union. Craig also notes that depending on what you’re using the funds for, your HELOC interest could potentially be tax deductible, which significantly reduces borrowing costs.
Sarah Alvarez, Vice President of Mortgage Banking at William Raveis Mortgage, also believes HELOCs are a great borrowing option now, and one that could even become more affordable in the coming year.
“HELOC rates are directly tied to the Federal Funds rate and, as such, are expected to decline or at the very least, remain stable through the end of 2025,” Alvarez said. “They are still a very useful tool for being able to tap additional equity in a property while protecting a great first mortgage rate.”
However, while Keith Heritage, financial advisor and managing partner at Heritage Financial, agrees that “a HELOC often makes sense despite what inflation rates might be,” Heritage suggests that you look for one with minimal fees and “make sure to shop around for one that fits your goals and needs.”
Start shopping for HELOCs online today.
Rising inflation could create problems for HELOC borrowers
While most experts say HELOCs remain a viable — and even advantageous — borrowing choice, this doesn’t mean there are no downsides or risks.
“Rising inflation will make it tough for the Fed Funds rate to continue to be lowered, which is not great news if you have a home equity line of credit with a variable rate that could potentially go up,” Craig says. “However, there’s no guarantee that rates would automatically go up with rising inflation, as they could stay stagnant, and at some point lower once inflation is under control.”
Craig recommends considering a fixed-rate home equity loan if the variable rate of a HELOC causes you concern, as you could lock in your home equity rate for the life of the loan if you chose this alternative.
If you do opt for a HELOC, though, Heritage recommends shopping around to get the best rates, as some banks offer more favorable loan terms than others. With the potential for HELOC rates to climb, finding a loan with the lowest starting rate can help you keep your borrowing costs affordable over time.
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Head of Russia’s nuclear defense forces killed in Moscow blast triggered by device hidden in scooter, officials say
Moscow — The head of Russia’s Nuclear, Biological, and Chemical Defense Forces, Lt. General Igor Kirillov, was killed along with his deputy early Tuesday in an explosion in Moscow, Russia’s Investigative Committee said.
An explosive device hidden in an electronic scooter went off outside a residential building as the two men left the structure, Agence France-Presse cites investigators as saying.
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“Investigators, forensic experts and operational services are working at the scene,” committee spokesperson Svetlana Petrenko said in a statement. “Investigative and search activities are being carried out to establish all the circumstances around this crime.”
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The committee carries out responsible major investigations in Russia.
Kirillov was sentenced in absentia by a Ukrainian court on Dec. 16 for the use of banned chemical weapons in Ukraine during Russia’s military operation in Ukraine that started in Feb. 2022.
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Ukraine’s Security Service, the SBU, said it had recorded more than 4,800 uses of chemical weapons on the battlefield since February 2022, particularly K-1 combat grenades.
During the almost 3-year operation, Russia has made small but steady territorial gains to the nearly one-fifth of Ukraine it already controls.
Kirillov had been in his post since 2017, AFP notes.
A powerful earthquake hit the Pacific island nation of Vanuatu Tuesday, smashing buildings in the capital, Port Vila, including one housing the embassies of the U.S. and other nations. A witness told Agence France-Presse of bodies seen in the city.
Dan McGarry, a journalist with the Organized Crime and Corruption Reporting Project based in Vanuatu, told the Reuters news agency in an interview that police said at least one person had been killed and injured people had been taken to hospital.
“It was the most violent earthquake I’ve experienced in my 21 years living in Vanuatu and in the Pacific Islands. I’ve seen a lot of large earthquakes, never one like this,” he said.
The 7.3-magnitude quake struck at a depth of 35 miles, off the coast of Efate, Vanuatu’s main island, at 12:47 p.m. local time, according to the U.S. Geological Survey.
The ground floor of a building housing the U.S, French and other embassies had been crushed under higher floors, resident Michael Thompson told AFP by satellite phone after posting images of the destruction on social media.
“That no longer exists. It is just completely flat. The top three floors are still holding but they have dropped,” Thompson said.
“If there was anyone in there at the time, then they’re gone.”
Thompson said the ground floor housed the U.S. embassy, but that couldn’t be immediately confirmed.
A photo showed significant damage to the building:
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The United States has closed the embassy until further notice, citing “considerable damage” to the mission, the U.S. embassy in Papua New Guinea said in a message on social media. “Our thoughts are with everyone affected by this earthquake,” the embassy said.
The New Zealand High Commission, housed in the same building, suffered “significant damage,” a statement from Foreign Minister Winston Peters’ office said, adding that, “New Zealand is deeply concerned about the significant earthquake in Vanuatu, and the damage it has caused.”
Thompson, who runs a zipline adventure business in Vanuatu, said, “There’s people in the buildings in town. There were bodies there when we walked past.”
A landslide on one road had covered a bus, he said, “so there’s obviously some deaths there.”
The quake also collapsed at least two bridges, and most mobile networks were cut off, Thompson said.
“They’re just cracking on with a rescue operation. The support we need from overseas is medical evacuation and skilled rescue, (the) kind(s) of people that can operate in earthquakes,” he said.
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Video footage posted by Thompson and verified by AFP showed uniformed rescuers and emergency vehicles working on a building where an external roof had collapsed onto a number of parked cars and trucks.
The streets of the city were strewn with broken glass and other debris from damaged buildings, the footage showed.
Nibhay Nand, a Sydney-based pharmacist with businesses across the South Pacific, said he had spoken to staff in Port Vila who said most of the store there had been “destroyed” and that other buildings nearby had “collapsed.”
“We are waiting for everyone to get online to know how devastating and traumatic this will be,” Nand told AFP.
A tsunami warning was issued after the quake, with waves of up to three feet forecast for some areas of Vanuatu, but it was soon lifted by the Pacific Tsunami Warning Center.
Earthquakes are common in Vanuatu, a low-lying archipelago of 320,000 people that straddles the seismic Ring of Fire, an arc of intense tectonic activity that stretches through Southeast Asia and across the Pacific Basin.
Vanuatu is ranked as one of the countries most susceptible to natural disasters such as earthquakes, storm damage, flooding and tsunamis, according to the annual World Risk Report.
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