If you’re looking to borrow money with a product that could become even cheaper in the weeks and months to come, a home equity line of credit (HELOC) may be your best choice. Because the home functions as collateral in these borrowing exchanges, lenders tend to offer lower rates to qualified borrowers than they may have otherwise received with a personal loan or credit card. And with the average home equity amount hovering around $320,000 currently, owners have a lot of equity to potentially utilize. 

Fortunately, interest rates on HELOCs have been on a steady decline for much of the last year. After falling for most of 2024, HELOC interest rates hit an 18-month low to start 2025 – and they could decline even further as the year progresses. While trying to time an application to a low point in the interest rate climate is difficult, home equity borrowers should constantly be looking for opportunities to save, particularly with a HELOC that has a variable rate that will decline further as market conditions evolve. But when, exactly, will HELOC interest rates drop again? That’s what we’ll break down below.

See what HELOC interest rate you’d be eligible for here.

When will HELOC interest rates drop again?

Timing the next HELOC rate drop can be difficult and is something that existing borrowers won’t need to worry about (their rates will adjust independently each month). That said, based on recent history and influencing economic factors, HELOC rates could adjust again on or around the following dates:

January 28-29, 2025

While the chances of an interest rate cut at the January Fed meeting look slim right now (the CME Group’s FedWatch tool has a pause in cuts set to an almost 100% certainty), what’s said (and not said) after that meeting could have an impact on interest rates on a variety of products, including HELOCs. 

If the Fed indicates additional rate cuts to come in the winter or spring, HELOC rates may fall in anticipation of that action. But if it looks like rates will remain paused, HELOC rates may stay the same or even tick up slightly. Understanding this dynamic, then, borrowers considering a home equity line of credit may want to start shopping for lenders now, with low rates still readily available.

Get started with a HELOC here.

February 12, 2025

On paper, it wouldn’t seem to make sense that the next inflation report would impact home equity loan and HELOC interest rates. But all eyes will be on the next inflation reading (showing January data) to determine if recent rises in inflation were temporary or indicators of a larger issue. Inflation, after all, rose in October, November and December and is now almost a full percentage point above the Federal Reserve’s target 2% goal. 

If it ticks up in January, then, it will indicate that additional rate cuts to come are on hold, perhaps longer than many borrowers hoped or expected. And that will lead to an adjustment to HELOC rates. On the other hand, if the inflation report is an encouraging one – as many were in 2024 – it could give the Fed reason to resume its interest-rate-cutting campaign earlier in 2025. Either way, this is a date worth watching for borrowers.

Other HELOC interest rate factors

Inflation and the Federal Reserve can both impact interest rates on HELOCs and home equity loans, but they’re not the only factors to consider. All of the following can also influence what rate you’re ultimately offered:

• Your credit score: The higher your credit score, the lower your interest rate tends to be, regardless of the borrowing product. HELOCs are no exception.
• Your debt-to-income ratio: Determined by dividing your monthly loan debt by your gross monthly income, this factor will give lenders insight into how much additional debt you can comfortably afford to repay. If your debt-to-income ratio is too high, your rate could be higher to offset the presumed risk the home lender is taking on.
• Your loan terms: Right now, the average HELOC rate is 8.28% but it may be marginally different based on the repayment period you choose. So explore both 10- and 15-year repayment options to see which is cheaper right now. Even a small difference in rates can add up to significant savings spread out over the full repayment period.

The bottom line

Predicting the future of interest rates can be tricky. But if you know you need to borrow money, don’t want to pay a lot to do so and want to be well-positioned to exploit future rate drops without having to pay to refinance, a HELOC offers the way to do so. Just make sure to calculate your potential repayments at a series of realistic interest rates ahead to ensure that you can easily repay all that’s been borrowed.

Have more HELOC rate questions? Learn more online today.