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Whether you’re considering borrowing equity from your home via a home equity line of credit (HELOC) or have already done so and are making repayments, recent months have brought positive news. Not only did HELOC interest rates fall for much of 2024 but they continued that downward trend in 2025. They hit an 18-month low in January, a two-year low in February and then continued to fall in March. Now at just 8.06% for qualified borrowers, HELOCs are materially lower than they were at the start of 2024, when they were averaging 10.16%.
And that change in rates is a benefit for both prospective borrowers and existing ones, thanks to the variable rate structure that HELOCs come with. HELOC rates change independently each month, without having to be refinanced, so some borrowers who already have a HELOC, for example, are likely already seeing their monthly payments reduced.
Still, with any product that has a variable interest rate, it behooves borrowers to stay alert, particularly in today’s evolving economic climate. So, what, exactly, should HELOC borrowers be monitoring now? Below, we’ll detail three timely things they should watch for.
Start by seeing how low of a HELOC rate you’d be eligible for here.
3 things HELOC borrowers should watch for now
Here are three timely things that HELOC borrowers should be closely monitoring now:
This week’s inflation reading
The Bureau of Labor Statistics will release its next inflation reading, this time for February, on March 12. And it’s a critical reading to watch for after the inflation rate increased in the last four straight months. Should the rate increase yet again, it could reverberate throughout the economy and cause market concerns over an extended fight to tame inflation. While an increase in inflation won’t directly impact HELOC rates, it could have a major impact on Federal Reserve monetary policy, which could affect HELOCs. And it won’t take a particularly long time to occur with the Fed’s next meeting set for March 18 and March 19, so monitor tomorrow’s reading for signs of possible rate changes to come.
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Next week’s Fed Reserve meeting
The Federal Reserve issued rate cuts in its final three meetings of 2024: a 50 basis point cut in September followed by 25 basis point cuts in both November and December. But when the bank met in January, it paused those rate cuts, and then there was no scheduled meeting in February. So, all eyes will be on the Fed later in March to see what, if anything, it does to interest rates. And while most don’t expect changes to occur then, what is said (and isn’t said) after the two-day meeting could impact interest rates, particularly if higher rates for longer appear more likely. This, in turn, could affect what HELOC rate offers new borrowers receive as well as the rate existing HELOC users will repay in April.
Changing home equity levels
Home equity levels were around $320,000 on average last November and have since fallen to around $313,000, according to a March report. Still, home equity levels overall are up around 6% year over year, giving many homeowners plenty of equity to potentially utilize. But this figure can rise or fall, also based on market conditions, and home values can be dramatically impacted this year in certain areas of the country. So this is a particularly important item to monitor now, regardless of whether you’re using a HELOC or home equity loan. Since the home functions as collateral, you’ll always want to be able to make your payments or you’ll risk your homeownership. And you’ll also want to avoid overborrowing if your home value is uncertain, which can be easy to do now considering that HELOC rates are lower than home equity loans and personal loans and are three times cheaper than credit cards. Just make sure that your funding source – in this case, your home – remains reliable during any draw period.
The bottom line
A HELOC is a cost-effective and smart borrowing tool to utilize now but it won’t be immune from larger market conditions and changes. By monitoring inflation rates, Fed meetings and home equity levels, potential borrowers and existing HELOC users will be able to make better-informed borrowing decisions both this month and over the extended repayment period.
