Will HELOC interest rates drop again this week?
Discovering a cost-effective way to borrow money has been difficult over the past few years, thanks to elevated inflation and the highest federal funds rate in decades aimed at combating it. But the borrowing climate has shown signs of easing over the past few months as inflation declined and the Federal Reserve embarked on an interest-rate cut campaign that saw it reduce its federal funds rate by one full percentage point. And while that campaign has been paused in the early months of 2025, it could resume again in May or June, should items like inflation continue to decline.
One borrowing product that's seen it's value increase (and it's rate consistently decline) during this period is a home equity line of credit (HELOC). HELOC interest rates are down more than two full percentage points since September 2024, making it a cost-effective and reliable way to borrow for homeowners currently sitting on an average home equity amount of around $313,000.
Still, HELOC rates are variable and subject to change over time, so before getting started, it helps to understand the trajectory of rates on the product. Specifically, will HELOC interest rates continue to decline? And could they drop again as soon as this week? That's what we'll discuss below.
Start by seeing which HELOC rate you could qualify for here.
Will HELOC interest rates drop again this week?
Predicting the long-term trajectory of interest rates is inherently difficult to do and it should be done cautiously when borrowing against your home equity, as your home functions as collateral in these exchanges. That said, there's a strong likelihood that HELOC interest rates will continue to decline, perhaps even this week.
For starters, the recent performance of HELOC interest rates is encouraging. They declined for much of 2024. And, in January 2025, they hit an 18-month low. They fell again, this time to a two-year low, in February. And hit a new two-year low in March. Seemingly declining on a weekly basis, HELOC interest rates declined again at the start of April, falling below 8% to hit 7.90%. That latest drop, ironically, came as home equity loan rates increased, making HELOCs now half a percentage point lower, on average, than home equity loans (at 8.40%).
But it's important to note that this consistent drop in HELOC interest rates has come despite muted success with inflation and the recent pause in rate cuts. Inflation actually rose in October, November, December and January before declining in February to 2.8%. Inflation can have an impact on borrowing rates for a variety of products, HELOCs not excluded, as a higher inflation rate could cause the Fed and, thus, lenders, to keep their rates higher.
However, a decline in inflation can have the opposite effect. And, this week, the next inflation reading (this time for March) will be released on April 10. Should that report, released by the Bureau of Labor Statistics, show a second drop in the inflation rate, HELOC rates are likely to decline yet again. A drop in the inflation rate is also likely to increase the odds of another Fed rate cut when the bank meets again in May. Since Fed activity impacts home equity borrowing rates and because lenders don't need to wait for formal Fed action to start lowering their rates to borrowers, it's possible, if not likely, that HELOC interest rates will continue their downward trend yet again this week.
Compare your current HELOC options here now.
Dates to monitor
While predicting the future of interest rate changes is exactly that, a prediction, there are some dates when rate changes are more likely to occur. So consider marking down the following dates on your calendar, and the days that follow them, if you're looking to secure the lowest rate possible:
- Thursday, April 10: This is when the next inflation reading will be released and, with it, the likely impacts on the interest rate climate.
- Friday, May 2: The next unemployment report, this time for April, will be released on the first Friday of May. While not as directly impactful as some other data points, unemployment has and will continue to impact Fed policy, so it's worth monitoring.
- Wednesday, May 7: The Fed won't meet in April but will conclude its next two-day meeting on this date. So all eyes will be on the bank to see what it does about interest rates (if anything). But pay close attention to what Federal Reserve Chairman Jerome Powell says after the meeting for hints about future rate changes, which can be powerful enough to impact rates, even absent a formal rate adjustment one way or another.
The bottom line
The weekly trend showing a decline in HELOC interest rates could continue this week, so homeowners considering the line of credit as a cost-effective borrowing alternative may want to pay close attention. Still, predicting future changes in interest rates is inherently risky, particularly with a variable-rate product like a HELOC. Homeowners interested in borrowing from their home equity, then, should also explore the fixed-rate home equity loan alternative to better determine which makes more financial sense for their circumstances both now and over the long term.
