Why you should borrow home equity before the next Fed meeting
While the inflation rate has slowed from the highs of the past 18 months, the 3.7% inflation rate reported for September 2023 is still higher than the Federal Reserve's target of 2%. This could mean that the Fed will raise interest rates yet again when they meet on November 1.
The Fed has raised interest rates nearly a dozen times over the past 18 months. While it left rates unchanged in its September meeting, another month of inflation rates above the goal could lead to another hike.
While another rate hike would be good news for savers looking to earn interest in CDs and savings accounts, it would not be so great for borrowers, including those looking to take out a home equity loan.
Ready to get started with a home equity loan? See today's top home equity loan rates here.
How home equity rates look right now
Currently, taking a loan against your home equity will carry a rate in the high single digits, with the average sitting at 8.75%. This is similar to the current average mortgage rate, which as of October 11 was 7.89%.
Learn more about home equity loans today.
Why you should borrow before the next Fed meeting
If the Fed elects to raise interest rates again when they meet in September, that will likely lead to a jump in the rate charged by lenders for home equity rates.
This means that if you're considering using a home equity rate or a home equity line of credit (HELOC), you may want to do so now to lock down the current rate, as high as it may seem. After a rate hike, interest for home equity loans and HELOCs could go up — and potentially into the double digits. If you act now, though, that rate won't apply to you.
Uses for home equity loans
A home equity loan can be used for many things. Here are some of the popular uses for the product:
Home repairs
One of the most frequent uses of a home equity loan is to do repairs and improvements to the house itself. This is especially useful if you're considering moving soon. Repairing and improving your home – from replacing an old water heater to doing a remodel of a bathroom or a kitchen – could greatly improve its resale value, allowing you to repay the loan and make more money from the sale. Even if you're not planning on moving soon, a few repairs could improve the sale value down the line, so taking out a home equity loan now and limiting your interest rate could be a good idea.
Paying for a large expense
If you have a large expense coming up, like buying a car, a home equity loan could help you pay for it. Just make sure there aren't any other options available with lower interest rates.
Emergency expenses
While this situation is a little harder to plan for, emergency expenses are often a case where a home equity loan could be useful. If you were recently hit with an unexpected expense and you're trying to figure out how to pay for it, a home equity loan is an option – and if you're going back and forth about whether or not to go for it, consider making a choice now to lock in a more reasonable rate.
Get started on a home equity loan now.
The bottom line
With inflation failing to fall to the Federal Reserve's goal of 2% in September, a rate hike is possible when they meet next month. If you're considering borrowing money against your house, it makes sense to do it soon to lock in a relatively low rate – if rates do go up, interest on home equity loans could climb into the double digits.
