Home equity loans have become increasingly attractive in recent months due to lower interest rates and higher home equity levels. However, with a Federal Reserve meeting looming, some experts suggest that now might be the time to lock in a low rate before they potentially rise again.
Getting your timing right is half the battle when it comes to borrowing and saving money. This has been evident in recent years as inflation and higher interest rates made borrowing much more expensive – and saving much more beneficial thanks to higher returns. If you're a homeowner looking to borrow a large sum of money, however, one of the optimal ways to do so recently has been with a home equity loan.
Home equity loans have had lower interest rates than many popular alternatives (they're almost three times cheaper than credit cards right now). And thanks to a changing real estate market, home equity levels have spiked with the average homeowner in possession of around $320,000 worth of equity. So the timing, for many homeowners considering a home equity loan, is optimal now. And that's especially pertinent with a looming Federal Reserve meeting set for later in January. Below, we'll break down why owners should consider opening a home equity loan before then.See what home equity loan interest rate you could qualify for here.Should you open a home equity loan before the January Fed meeting?Not sure if now is a good time to pursue a home equity loan. Here are three reasons why it may be:Rates have ticked up recentlyHome equity loan interest rates were on a steady decline for much of 2024 and, while they're still relatively low, they've ticked up again recently. A 15-year home equity loan, for example, was averaging 8.38% in October, according to historic Bankrate data. Now that same loan is at 8.57%. While that may not seem like a major change on paper, it could add up to a significant difference over that 15-year repayment period. And it could be indicative of additional rate hikes to come (lenders don't need to wait for a formal Fed rate change to adjust their offers). For many borrowers, then, it may be beneficial to lock in today's available rate before it has a chance to rise again.Get started with a home equity loan now.They could rise again post-Fed meetingEven if home equity loan interest rates remain relatively steady between now and the end of the next Fed meeting on January 29, it doesn't mean that they can't adjust post-meeting. While the odds of the Fed maintaining its current federal funds rate range are high (the CME Group's FedWatch tool has it listed at a 99.5% certainty), what's said and isn't said by Fed chairman Jerome Powell after the meeting has the power to move rates. And if the implication is that additional rate cuts will remain on hold, interest rates on a series of products – including home equity loans – could rise in response.It takes time to have the funds disbursedIf you're considering borrowing from your home equity to finance spring home repair projects or to finance a big summer vacation, it may feel unusual to consider applying for the funds now, in the middle of January. But it makes sense to do so. It can take weeks and, more likely, months to have your home equity loan funds disbursed. You'll need to shop for low rates and lenders, gather documentation, and complete an appraisal and a closing – all before getting your money. It makes sense, then, to start the process now. This will ensure that you get your equity in a timely fashion and that you don't wind up paying more for it should the Fed adjusts rates again this spring.The bottom lineThe window of opportunity to lock in a low-rate home equity loan is still open. But it could close slightly after the next Federal Reserve meeting. So homeowners considering this option may want to act soon. Just be sure to only borrow an amount that you can comfortably afford to repay to avoid potentially losing your home to the lender.Learn more about your current home equity loan options here
Home Equity Loans Federal Reserve Interest Rates Mortgage Personal Finance
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