Fed Rate Cut May Ease Home Equity Loan, HELOC Costs
The Federal Reserve has initiated a potential easing cycle by lowering its benchmark overnight lending rate for the first time in 2025. This move, which comes after months of steady rates, may influence home equity loan and HELOC rates, affecting how expensive it is for homeowners to tap into their equity.
Homeowners have been active in the second quarter of 2025, extracting a total of $52 billion in equity from their properties. This represents a 16 percent increase from the previous quarter. With homeowner equity totaling $17.5 trillion, the average homeowner now holds $307,000 in equity.
The Fed's decision to cut rates could lead to a decrease in average HELOC rates, potentially reaching around 7.3 percent by the end of 2025. Fixed-rate home equity loans may also ease, settling at around 7.9 percent. However, the extent of these changes depends on how the economy evolves, with inflation and the job market being key factors. Michael Feroli, Chief U.S. economist at J.P. Morgan, expects further Fed rate cuts in 2025, which could lead to more significant improvements in monthly payments for consumers over time.
The Fed's rate cut marks the start of a potential easing cycle, which could lead to lower home equity loan and HELOC rates. Homeowners have been actively using their equity, extracting $52 billion in the second quarter of 2025. As the economy evolves, consumers may see noticeable improvements in their monthly payments, but it will take multiple rate cuts for significant changes to occur.
Read also:
- Electric-powered vessels take to the waters of Maine
- Elon Musk accused by Sam Altman of exploiting X for personal gain
- Comparing the value of top electric scooters: Kinetic DX versus Bajaj Chetak versus TVS iQube - Which one offers the best bang for the buck?
- American Eagle's risque promotional effort featuring Sydney Sweeney leads to the brand being categorized as a 'trendy stock' among teenagers.
