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Is a HELOC still a good idea amid growing inflation?
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Inflation ticked up again in February with prices that were 0.4% higher than those in January. And, a similar trend occurred in January when inflation unexpectedly increased month-over-month. That’s important data to consider if you’re thinking about taking out a home equity line of credit (HELOC) (or borrowing money for another purpose).
Right now, the Federal Reserve’s benchmark rate is paused at a 23-year high. And while there have been widespread expectations that the Fed would start cutting rates in mid-2024, if inflation continues to tick up in the future, it could threaten to delay those cuts.
And, since the federal funds rate forms the foundation for consumer interest rates, that could be bad news for borrowers. So does it still make sense to take out a HELOC amid growing inflation?
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Is a HELOC still a good idea amid growing inflation?
Despite the issues with stubborn inflation, it may still be a good idea to tap into your home equity with a HELOC right now. Here’s why:
Rates are still lower than other popular options
Because HELOCs use your home equity as collateral, they tend to come with competitive interest rates, as there’s less risk to the lender. That’s especially true when compared to other borrowing options.
For example, the average credit card rate is currently 21.47% — and the average rate on personal loans is currently 12.10%. But today’s average HELOC interest rate is just 8.98%, so in many cases, it’s cheaper to borrow money with a HELOC than another type of lending product.
Take advantage of competitive HELOC interest rates now.
Rate cuts may still come this year
The Federal Reserve began increasing rates in response to COVID-era inflation — during which the annual inflation rate climbed above 9%. So while the inflation rate ticked up in February, growing 3.2% year-over-year, there has still been a significant improvement in the inflation rate compared to the highs experienced in mid-2022.
And, while economists have revised their forecasts to push back rate cut expectations, they still expect the Fed to start cutting rates later this year. That’s good news for those who open a HELOC now, as the variable nature of HELOC rates means that borrowers could benefit from future rate cuts.
HELOCs offer unique tax benefits that others don’t
Competitive interest rates aren’t the only benefit HELOCs offer; they may also come with tax benefits. For example, if you use the proceeds from your HELOC for home repairs or renovations, you may be able to deduct the interest you pay on the loan.
However, to qualify for this tax deduction, you’ll have to use the loan to repair or renovate the home you’re borrowing against. If you use the proceeds from a home equity loan to repair or renovate a different property, your interest may not be tax deductible.
“Interest on home equity loans and lines of credit are deductible only if the borrowed funds are used to buy, build, or substantially improve the taxpayer’s home that secures the loan,” the IRS states online. “The loan must be secured by the taxpayer’s main home or second home (qualified residence), and meet other requirements.”
Don’t miss out on the benefits of a HELOC. Compare your options now.
The bottom line
A HELOC may be a wise choice right now, even amid growing inflation. After all, HELOC interest rates are still competitive when compared to rates on other lending options — and rate cuts may still be on the table for later this year. Plus, these loans come with potential tax benefits that could allow you to write off some of the interest on your taxes. Compare your HELOC options now to find out how affordable these loans can be.
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Sen. Thom Tillis says “the scope” of Helene damage in North Carolina “is more like Katrina”
As recovery missions and repairs continue in North Carolina more than a week after Hurricane Helene carved a path of devastation through the western part of the state, the state’s Republican Sen. Thom Tillis called for more resources to bolster the relief effort and likened the damage to Hurricane Katrina’s mark on Louisiana in 2005.
“This is unlike anything that we’ve seen in this state,” Tillis told CBS News’ Margaret Brennan on “Face the Nation with Margaret Brennan” on Sunday morning. “We need increased attention. We need to continue to increase the surge of federal resources.”
Hurricane Helene ripped through the Southeast U.S. after making landfall in Florida on Sept. 26 as a powerful Category 4 storm. Helene brought heavy rain and catastrophic flooding to communities across multiple states, including Georgia, South Carolina, Tennessee and Virginia, with North Carolina bearing the brunt of the destruction. Officials previously said hundreds of roads in western North Carolina were washed out and inaccessible after the storm, hampering rescue operations, and several highways were blocked by mudslides.
Tillis said Sunday that most roads in the region likely remained closed due to flooding and debris. Water, electricity and other essential services still have not been fully restored.
“The scope of this storm is more like Katrina,” he said. “It may look like a flood to the outside observer, but again, this is a landmass roughly the size of the state of Massachusetts, with damage distributed throughout. We have to get maximum resources on the ground immediately to finish rescue operations.”
Hurricane Katrina left more than 1,000 people dead after it slammed into Louisiana’s Gulf Coast in August 2005, flooding neighborhoods and destroying infrastructure in and around New Orleans as well as in parts of the surrounding region. It was the deadliest hurricane to hit the mainland U.S. in the last 50 years, and the costliest storm on record.
The death toll from Hurricane Helene is at least 229, CBS News has confirmed, with at least 116 of those deaths reported in North Carolina alone. Officials have said they expect the death toll to continue to rise as recovery efforts were ongoing, and a spokesperson for the police department in Asheville told CBS News Friday their officers were “actively working 75 cases of missing persons.”
On Saturday, the U.S. Department of Transportation released $100 million in emergency funds for North Carolina to rebuild the roads and bridges damaged by the hurricane.
“We are providing this initial round of funding so there’s no delay getting roads repaired and reopened, and re-establishing critical routes,” U.S. Transportation Secretary Pete Buttigieg said in a statement. “The Biden-Harris administration will be with North Carolina every step of the way, and today’s emergency funding to help get transportation networks back up and running safely will be followed by additional federal resources.”
President Biden previously announced that the federal government would cover “100%” of costs for debris removal and emergency protective measures in North Carolina for six months.
With North Carolina leaders working with a number of relief agencies to deal with the aftermath of the storm, Tillis urged federal officials to ramp up the resources being funneled into the state’s hardest-hit areas. The senator also addressed a surge in conspiracy theories and misinformation about the Biden Administration’s disaster response, which have been fueled by Republican political figures like former President Donald Trump.
Trump falsely claimed that Mr. Biden and Vice President Kamala Harris, his Democratic opponent in the November presidential election, were diverting funds from Federal Emergency Management Agency that would support the relief effort in North Carolina toward initiatives for immigrants. He also said baselessly that the administration and North Carolina Gov. Roy Cooper, a Democrat, were withholding funds because many communities that were hit hardest are predominantly Republican. Elon Musk has shared false claims about FEMA, too.
“Many of these observations are not even from people on the ground,” Tillis said of those claims. “I believe that we have to stay focused on rescue operations, recovery operations, clearing operations, and we don’t need any of these distractions on the ground. It’s at the expense of the hard-working first responders and people that are just trying to recover their lives.”
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