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The Federal Reserve will meet for just the second time in 2025 this week for a two-day meeting to determine, among other things, the future of interest rates. At a range between 4.25% and 4.50% currently, the Fed paused its interest rate cut campaign in January after issuing reductions in September, November and December 2024. Now, economists and many American borrowers and savers will look to the bank for indications of where monetary and rate policy is heading.
The Fed’s moves (or lack thereof) this week should be particularly important for homeowners who have borrowed or are considering borrowing equity via a home equity line of credit (HELOC). Right now, interest rates on HELOCs are around the lowest they’ve been in years, but with a variable rate subject to change monthly based on market conditions, this week’s Fed meeting could be an indication of future rate relief to come … or higher rates for longer. So what, exactly, should HELOC borrowers be looking for at this week’s Fed meeting? Below, we’ll detail three critical items to monitor.
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What HELOC borrowers should look for at this week’s Fed meeting
Here are three important items HELOC borrowers should monitor once the latest Fed meeting concludes on March 19:
Formal rate cuts
A formal rate cut would be welcome for HELOC borrowers as the variable rate the product comes with is naturally positioned for future rate adjustments. A cut in the federal funds rate this week, even by 25 basis points, to a range between 4.00% and 4.25% would be welcome as it would result in cheaper HELOC rates. And there is more of a possibility of this action occurring now that the inflation rate fell in February. Still, that rate is now 2.8%, almost a full point above the Fed’s target 2% goal, so a formal rate cut (as ideal as it would be this week) looks highly unlikely. The CME Group’s FedWatch tool has a cut listed at just a 1% likelihood now. So, keep an eye out for any formal changes here, but manage expectations appropriately.
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Discussions about future rate cuts
Almost as important as what’s done in this week’s Fed meeting is what’s said at its conclusion. Should Federal Reserve chairman Jerome Powell hint at higher rates for longer, prospective HELOC borrowers may want to act promptly versus waiting for a lower rate that may take more time than they’d like to materialize. On the other hand, comments or suggestions about imminent rate cuts could give borrowers a better idea of what their future repayments will look like later in 2025. In other words, look at the formal rate action (or pause) but stay for the post-meeting comments that could give more insight into the future of interest rates (including those for HELOCs).
Lender movement
HELOC lenders don’t need to wait for formal Fed rate action to adjust their offers to borrowers. So if they feel that another rate cut looks promising (even if it’s not issued formally this March) they may get ahead of that formality by adjusting their rate offers downward. HELOC rates, after all, fell for much of 2024, and hit 18-month and two-year lows in the opening weeks of 2025, all while the federal funds rate remained on pause. So keep an eye out for what lenders do post-meeting and consider researching your options beyond your current mortgage lenders for opportunities to capitalize on rate changes ahead.
The bottom line
While a reduction in rates appears unlikely for this week, HELOC borrowers should still monitor the actions at this week’s Fed meeting for hints about what’s still to come. HELOC interest rates could continue to decline with a formal rate cut but may still fall even without one, based on market conditions and other factors, so it’s worth staying informed and up-to-date. By doing so, borrowers can potentially secure a below-average HELOC rate now, setting themselves up for future savings over the draw and repayment periods of their line of credit.
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