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The interest rates of both home equity loans i home equity lines of credit (HELOC) they have been in a steady decline for most of 2024, providing homeowners with a cost-effective way to borrow money when rates on other products rose. HELOCs, in particular, have taken a hit multiple 2024 lows lately, making them an attractive option for homeowners who don’t want to burden themselves with the fixed rate which includes a home equity loan. HELOCs, on the other hand, have variable rates that will change every month. And the owners will not have to pay refinance to secure the lowest rate as the line of credit will be adjusted independently.
Understanding this dynamic, then, both current borrowers and homeowners exploring their potential HELOC options may be wondering about the potential for HELOC Interest Rate fall further this December and in 2025. While predicting the future of interest rates is just that, a prediction, there is a strong chance that HELOC interest rates will continue to fall. Next, we’ll explain why.
See the HELOC interest rate you would qualify for here.
Will HELOC interest rates continue to drop this December?
HELOC interest rates are driven by a wide range of complex and interrelated factors. Here’s how rates for this product could drop further this month, even if only marginally:
Inflation could continue to fall. the last October inflation reading showed the rate rising to 2.6%, more than half a percentage point above where the Federal Reserve would like it to be. But if the new report, scheduled for release on Dec. 11, shows inflation falling again, it could encourage lenders to start lowering their rate offers on all products, including HELOCs. That said, an inflation reading is just one of a multitude of influencers, and it’s possible that other economic data can also negatively affect HELOC rates. But if inflation looks encouraging, lenders may start cutting their HELOC rates ahead of a formal Fed rate cut at the end of the month.
Explore your current HELOC options online now.
The Fed could continue to cut interest rates. This factor is combined with the previous one. But a 25 basis point cut in the federal funds rate is increasingly likely when the Fed meets again on December 17-18. The CME Group’s FedWatch The tool currently has an 86% chance of cutting. And it will become a virtual certainty between now and then if other economic data is released that encourages a rate cut. All that said, many lenders may have already started pricing these alleged rate cuts into their current offerings, meaning what you see in online lender marketplaces after December 18th may not be materially different than what you saw listed in the days leading up to the last Fed meeting in 2024.
What about a home equity loan?
Home equity loans are also worth exploring now, albeit with the recognition that they won’t be as profitable in a cooling rate climate as a HELOC will be. With their fixed interest rates, borrowers will have to wait for rates to drop significantly to make a refinance worth the time and money. On the other hand, home equity loan rates now average 8.40% for qualified borrowers, 15 basis points lower than the average HELOC rate of 8.55%. And while that may not seem like much, it can add up to significant savings over 10 to 15 years. amortization period. Therefore, it is also worth exploring this home equity loan alternative before formally applying for either.
The bottom line
The downward trend in HELOC interest rates that have been on for the first 11 months or so of 2024 could continue this December, assuming some influential economic factors break in a certain way. At the same time, home equity loans are slightly cheaper now and come with the security of a fixed interest rate, which can be attractive to borrowers in today’s changing exchange rates. So, explore both before you apply, and remember that your home acts as collateral in these loan swaps, so it’s critical that you only withdraw an amount that you can easily pay back to the lender.