Should you get a home equity loan before the Fed's April meeting?

News last week that inflation is on the rise again has millions of Americans resetting their expectations. With the latest report showing an uptick in inflation in March, which followed an increase in February, many are now wondering when, exactly, economic relief will come. Higher inflation has led to higher interest rates courtesy of the Federal Reserve, and that benchmark rate range is currently stuck at its highest point in 23 years. But with inflation stubborn, a cut to that rate appears delayed.

In a time of higher costs for everyday items and higher rates for borrowing, then, it's worth exploring alternative options. But with the Fed's next meeting set for April 30, it's important to get the timing right. If not, borrowers could risk paying more than they would have if they had acted earlier. 

Against this backdrop, it's worth considering a home equity loan before the Fed's April meeting. Below, we'll break down three reasons why you may want to pursue this option now.

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Should you get a home equity loan before the Fed's April meeting?

Here are three compelling reasons why homeowners may want to turn to their home equity in the next few weeks.

Interest rates are lower than the alternatives

Have you seen the interest rate many credit card companies are now charging? The average is over 20%. Personal loans are much better but the average rate there is still in the double digits. Alternatively, both home equity loans and home equity lines of credit (HELOCs) both come with rates under 10% right now. Because your home is the collateral in these circumstances, borrowers can often get a better rate than they would with alternative forms of credit. 

And while the rates are competitive right now, circumstances evolve quickly, particularly with another Fed meeting approaching. So it makes sense to lock in a lower rate now while they're still widely available.

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Interest rates may rise yet again

While hope was high at the start of the year that interest rates would be cut in 2024, the trio of recent inflation reports has dashed that optimism. And while many would be surprised to see the Fed hike rates in their April meeting, it's certainly more realistic than many would have thought a few months ago. 

One Fed official recently floated the idea of no rate cuts at all this year — and that was before the most recent inflation report release. Understanding this dynamic is key, then, and it may be a motivator for homeowners to tap into their home equity while it's still cost-effective to do so.

You may have a lot to utilize

Inflation and interest rates haven't been the only big numbers in the news. Recent data has also shown the amount of home equity the average homeowner currently has in their home — and it's significant. With around $299,000 of equity right now, around $190,000 of which can potentially be tapped into, homeowners are sitting on a substantial sum of money to use as they please. 

But that equity is largely affected by home prices, so it makes sense to use it now, while values are elevated. Any action by the Fed later this month could have a ripple effect across the economy, including the real estate market. Plus, if you use your home equity for specific spring home repairs and renovations, you may be eligible to write the interest off when you file your taxes next year.

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The bottom line

All eyes will be on the Federal Reserve at the end of the month as they meet amid a still-inflationary climate. But homeowners in need of extra financing may want to act now before the Fed announces their next move. By being proactive today homeowners can secure a relatively low interest rate on a home equity loan — and they can lock it in ahead of any potential rate increases. And with the average owner currently having a significant amount of equity to utilize, now may be the time to do so. As with all financial considerations, however, it's crucial to weigh home equity borrowing against the risks because you may lose your home if you can't pay back what you borrow on time.