Home equity loans have long been one of the more affordable ways for property owners to borrow and, unlike alternatives such as a home equity line of credit (HELOC), home equity loans typically offer borrowers a fixed interest rate and predictable payments. 

Unfortunately, home equity loan rates have soared in the post-pandemic era as the Federal Reserve raised the benchmark interest rate to fight inflation. While home equity loans and HELOCs remained cheaper than credit cards, borrowing costs hit the highest levels in years. 

The good news is, the tide may be turning. Driven by anticipation of a Fed rate cut, expert predictions of falling rates in the summer of 2024 proved accurate. With the latest inflation report showing just a 2.5% year-over-year increase in the all-goods index, the Fed rate cut announced in September and the Fed strongly signaling more cuts are coming, predictions of additional rate drops this fall have many owners hoping cheaper loan options will soon be on the table.

But, will rates drop in October or should homeowners hold on for further rate declines? We asked some experts where they think rates are trending. 

See how low of a home equity loan rate you could secure here.

Here’s the home equity loan interest rate forecast for October

Looking to access your home equity this month? Here’s what could happen to interest rates:

A rate reduction could be on the table

Homeowners eager to tap into their equity as soon as possible may have some new opportunities to borrow at a lower rate this October. 

“Home equity loan rates will be reduced by .50% in October,” predicts Melisa Cohn, Regional Vice President at William Raveis Mortgage. Cohn indicates that rates will drop because of the Federal Reserve’s recent rate cut at the September meeting. 

Borrowers who currently have home equity loans won’t see their costs decline, unlike those with variable-rate HELOCS that often move directly with the prime rate which is heavily influenced by the Fed. Although HELOC rates fluctuate over time, home equity loan rates are fixed. Anyone who already borrowed is locked in at the rate they were initially offered unless they refinance.

New home equity loan borrowers, however, could benefit from more affordable loan options coming on the market. The Fed’s benchmark rate is just one factor affecting how much banks charge homeowners looking to tap equity, but when it costs banks less to borrow, they often respond by lowering rates on home equity and other consumer loans. 

Start exploring your current home equity loan options online today.

Bigger rate cuts are coming

While loans should become more affordable in October, those who can hold on for a little longer may be rewarded for their patience. 

“I don’t think we’ll see much change in home equity rates in October; however, pretty sizable drops are coming,” predicts Aaron Gordon, Branch Manager and Senior Mortgage Loan officer at Guild Mortgage. “The Fed dropped rates 50 basis points in September so that was great news for home equity loans but the next Fed meeting isn’t until early November. With inflation getting closer to the Fed’s 2% stated target, I believe we’ll see steady drops over the next year.”

Ralph DiBugnara, President of Home Qualified, also believes rate drops are imminent but not necessarily immediate, although he predicts the rate decline will start in October. “With overall mortgage rates coming down because the Fed has started lowering the borrowing rate, home equity loan rates will come down as well,” he says. “This reduction should happen over the fourth quarter of 2024 and into 2025.”

DiBugnara explained that reduced consumer spending, higher unemployment rates and high levels of consumer debt will prompt the Fed to continue rate cuts, which will lead to further reductions in home equity loan costs for property owners. 

The bottom line

Of course, not everyone can delay their borrowing date indefinitely if they have pressing financial needs now and those looking for home equity loans in October should still see some good opportunities out there. The key will be finding them. 

“It’s important to shop home equity rates as there may be a pretty big difference between your favorite bank or credit union and other lenders,” Gordon says. By exploring multiple loan offers and comparing rates and fees, borrowers who need to tap their equity can find the best deals in the current market — while homeowners who aren’t on the clock can sit back and wait for even better offers in November and beyond.