Should I lock in a home equity loan rate before May?

If you're thinking about securing a home equity loan, getting the timing right is crucial — especially when it comes to locking in your rate. But in today's constantly shifting economic landscape, it can be tough to time the market. After all, there are a lot of variables at play, many of which impact where home equity loan rates head from one day to the next. In turn, many homeowners are grappling with the question of whether they should lock in a home equity loan rate now or see what happens over time. 

Part of the issue with making that decision is that home equity loan rates have edged lower recently, which can make this seem like a smart time to lock in a great home equity loan rate. But with inflation still a wildcard and the Federal Reserve holding off on any clear rate cuts so far in 2025, the home equity loan rate outlook for May is far from guaranteed. While some signs suggest rates could keep falling, others hint they might creep back up — and that uncertainty is putting borrowers in a tricky spot.

So what's the right move? Below, we'll walk through the case for locking in a rate before May — and why it might still make sense to wait — so you can make the decision that's right for you.

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Should I lock in a home equity loan rate before May?

Given today's unusual economic landscape, there are arguments to be made for locking in a home equity loan rate today — but there's also a case to be made for waiting to do so. Here's what to know:

Why you should lock in a home equity rate before May

Here's why you may want to consider locking in a home equity loan rate before May rolls around:

Today's home equity rates are low

The average home equity loan rate dipped this week by 0.04 percentage points, dropping from an average of 8.40% to 8.36%. While that change may seem slight, it's important to remember that home equity loan rates were already low — and are considerably lower than most borrowing alternatives. 

For example, the average rates for 5- and 15-year home equity loans — which are 8.36% and 8.42%, respectively — haven't ticked this low since October 2024. Rates for 10-year home equity loans are averaging 8.51% currently, which is only marginally higher than the five-month low that occurred last month. So, by locking your home equity loan rate now, you may be able to secure a rate that is as low or nearly as low as what's been offered over the last few months.   

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Inflation could cause rates to rise

After four consecutive months of rising inflation from October to December 2024, there was a collective sigh of relief when inflation cooled in February and then when it did so again in March. However, there's no guarantee that the trend will continue when the Bureau of Labor Statistics releases a new inflation report next month. If that report shows that inflation rose in April, lenders may respond by raising home equity rates. If that happens, then waiting until May could mean securing a higher rate than what you could have locked in now.

A May Fed rate drop is unlikely

Numerous factors impact home equity loan rates, but one of the most influential is the Fed monetary policy. If the Fed decides to cut rates at its May meeting, then home equity rates could fall, but there's a high likelihood that the Fed will continue its rate pause this May. 

After all, most experts don't expect that the Fed won't cut rates at its May meeting, given today's tumultuous economic and inflationary climate — and the CME FedWatch tool puts the chances of a May Fed rate cut at less than 7%. And, Fed Chair Jerome Powell has stated in recent weeks that the Fed is taking a cautious stance regarding rate cuts. So, given the low likelihood of a Fed rate cut happening next month, there's a good chance that the home equity loan rates you can lock in now will be similar to what you could secure next month. 

Why you may want to wait

On the other hand, there are a few reasons you may want to wait, including:

The recent downward rate trends could continue

Home equity loan rates have been trending downward overall since February, though rates did trend up slightly during the first two weeks of this month. However, home equity loan rates fell again this week — and there's always a chance that they could continue that downward trend over the coming weeks. While predicting where rates are headed can be difficult, there's a possibility that waiting until May could result in locking in a slightly lower interest rate than what's available today. 

The Fed might signal future rate cuts

The Fed is expected to keep rates paused, but if there's an indication that future rate cuts are on the horizon, it could lead to lower rates on home equity loans. As noted, the Fed rate isn't the only factor that impacts home equity loan rates, but, generally speaking, lenders may drop rates slightly if they become more confident about the possibility of rate cuts happening sooner rather than later. For this to happen, though, we would likely need to see inflation decline again. 

The bottom line

At the end of the day, whether you should lock in a home equity loan rate now or wait until May depends on how much certainty you're looking for. If you want to take advantage of today's relatively low rates — and avoid the risk of them rising if inflation picks back up — locking in your rate now could be the safer bet. But if you're not in a rush and think there's still room for rates to dip, waiting a bit longer might work in your favor.

Either way, don't rush the process. Take time to compare lenders, look at different loan terms and make sure you understand all the costs involved. Even a small difference in rates can have a noticeable impact on what you'll pay over time — and a little extra effort now could save you a lot down the road.