HELOC and home equity rates decline to multi-year lows

Core Insights - Home equity borrowing costs have decreased significantly, with the $30,000 home equity line of credit dropping to 7.31%, a reduction of 13 basis points, and the five-year home equity loan decreasing to 7.90%, down two basis points [1][2]. Group 1: Current Rates - The current average rates for home equity products are as follows: HELOC at 7.31%, five-year home equity loan at 7.90%, ten-year home equity loan at 8.08%, and fifteen-year home equity loan at 8.07% [2][4]. - Compared to four weeks ago, HELOC rates have decreased from 8.22% to 7.31%, and the five-year home equity loan has slightly decreased from 7.97% to 7.90% [2][4]. Group 2: Influencing Factors - Home equity rates are primarily influenced by Federal Reserve policy and long-term inflation expectations, with the Fed maintaining interest rates at its January meeting while monitoring inflation and the job market [3][4]. - Forecasts suggest that the Fed may implement three quarter-point cuts in 2026, indicating a potential easing of monetary policy [3]. Group 3: Comparison with Other Credit Types - Home equity products are generally less expensive than unsecured credit options, with HELOCs at 7.31% and home equity loans at 7.90%, compared to credit cards at 19.61% and personal loans at 12.27% [5]. - The rates for home equity loans are more favorable due to the collateralization of the home, which reduces the risk for lenders [4][5]. Group 4: Borrower Considerations - Borrowers are advised to consider their financial situation and goals when deciding between a HELOC and a home equity loan, and to consult with a loan officer for tailored advice [2][6]. - Key questions for borrowers include the amount of money needed, the frequency of withdrawals, and comfort with potential interest rate fluctuations [6].