A home equity line of credit (HELOC) is a popular way to borrow money against the equity in your home. They offer low interest rates and flexible repayment terms, making them a good option for a variety of borrowing needs.
However, HELOC interest rates are variable and can change over time, which can make it difficult to budget your HELOC payments, especially if interest rates rise.
So what is the outlook for HELOC interest rates in 2024? Financial analysts say HELOC interest rates may trend downwards throughout the year.
2024 HELOC interest rate forecast
The 2024 HELOC interest rate projections suggest that a variety of economic factors, including policy changes from the Federal Reserve, could cause rates to fall.
For example, Bankrate chief financial analyst Greg McBride expects HELOC interest rates to average around 8.45% by the end of the year, down from an average of 10.12% so far.
The forecast is based on expectations that the Federal Reserve will cut interest rates, which typically affects interest rates on adjustable-rate loans such as HELOCs.
In addition, a growing economy and lower mortgage interest rates could make initial HELOC rates more competitive and lower the average HELOC interest rate to a greater extent than would result from interest rate cuts by the Federal Reserve alone.
It's also worth noting that borrowers with the strongest credit ratings are more likely to secure the best HELOC interest rates, which are significantly lower than the overall average.
Factors that will impact HELOC interest rates in 2024
Several factors will affect your 2024 HELOC interest rate, including:
Federal Reserve Interest Rate Policy
The Federal Reserve is the central bank of the United States. The Fed sets interest rates, which affect borrowing costs. The Fed has been raising interest rates to fight inflation. This has caused HELOC interest rates to rise. However, the Fed is expected to pause interest rate hikes in 2024. This could cause HELOC interest rates to fall.
economy
The economy is another factor that will affect HELOC interest rates in 2024. A good economy generally leads to higher interest rates, while a bad economy generally leads to lower interest rates. The U.S. economy is expected to grow in 2024, but at a slower pace than in 2023. This could result in a slight increase in HELOC interest rates.
Housing market
The housing market is also a factor that will affect HELOC interest rates in 2024. When the housing market is strong, HELOC interest rates typically rise, and when the housing market is weak, HELOC interest rates typically fall. The housing market is expected to remain strong in 2024, but is expected to cool slightly starting in 2023. This could result in a slight increase in HELOC interest rates.
Overall, there is a mixed outlook for HELOC rates in 2024. The Federal Reserve is expected to pause rate hikes, which could lead to lower HELOC rates. However, the economy and housing market are expected to remain strong, which could lead to a slight increase in HELOC rates.
Here are some additional factors to consider when looking at 2024 HELOC interest rates:
Credit score: Your credit score is the main factor that determines the interest rate you can get on a HELOC. The higher your credit score, the lower your interest rate. Home equity: The equity of your home also affects the interest rate you can get on a HELOC. The higher the equity, the lower your interest rate. Loan-to-value ratio (LTV): LTV is the ratio of the amount you borrow to the value of your home. The higher the LTV, the higher your interest rate.
If you're considering taking out a HELOC, it's important to compare interest rates from multiple lenders to find the best deal, and you should also consider your personal circumstances, including your credit score, home equity, and LTV.
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