Average HELOC and Home Equity Loan Rates for the week of October 27, 2022

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Key points to remember

  • Home equity loan rates rose slightly this week, while the rate for a HELOC remained stable.
  • Experts are predicting another rate hike from the Federal Reserve next week, which could impact home equity rates.
  • HELOC interest rates are often directly tied to what the Fed does.

Is this the calm before the storm for home equity loan and line of credit (HELOC) rates? Ahead of the Federal Reserve’s November meeting, home equity product rates remained virtually unchanged.

Next week will be a different story.

With inflation at 8.2% year-over-year in September, the Fed will almost certainly announce another big hike in the federal funds rate, a short-term interest rate that determines what banks charge themselves to borrow money. silver. Experts predict the Fed will go with a 75 basis point hike, the same as at their September meeting.

“Contrary to tradition mortgage rates, some home equity products, particularly home equity lines of credit, are directly tied to what the Fed does. As a result, we will almost certainly see rates on home equity loan products increase after next week’s announcement,” said Jacob Channelsenior economist at LendingTree.

Despite rising rates, consumers remain incentivized to borrow with home equity loans and HELOCs. Americans are sitting on a near-record amount of home equity, with the total net worth that can be tapped reaching $11.5 trillion in the second quarteraccording to Black Knight, a mortgage data and technology company.

“A lot of people, all of a sudden, have this extra equity in their homes that they want to leverage, so we’re seeing a huge demand for home equity loans and lines of credit,” says Lv PersaudCFP and Managing Director of Transition Planning & Guidance.

The interest rate for $30,000 HELOC remained at 7.30% week over week, while home equity loan rates only rose a few points.

Here are the average home equity loan and HELOC rates as of October 26, 2022:

Type of loan Price for this week Last week’s price Difference
$30,000 HELOC 7.30% 7.30% nothing
10-year $30,000 home equity loan 7.51% 7.43% +0.08
Home equity loan of $30,000 over 15 years 7.41% 7.38% +0.03

How these rates are calculated

These rates come from a survey conducted by Bankrate, which, like NextAdvisor, is owned by Red Ventures. Averages are determined from a survey of the top 10 banks in the 10 major US markets.

What are home equity loans and HELOCs?

Home equity loans and HELOCs are secured loans. You use the difference between what your house is worth and what you owe on your mortgage as a guarantee.

here is the difference between the two products:

HELOC work the same way as credit card. You get it on a revolving basis and only pay interest on what you’ve borrowed. As with credit cards, there will be a limit to how much you can borrow at one time. Interest rates on a HELOC are often floating, meaning they go up and down with an index, usually the prime rate. This is something you should always pay attention to, but especially in today’s rising rate environment.

Home Equity Loans are closer to personal loans in that they provide a one-time cash injection. You will pay it back over time, usually at a fixed rate. Once you’ve taken out a home equity loan, your interest payments won’t change, even if rates go up.

“Home equity is still a very attractive option in this environment, compared to other forms of borrowing like a cash refinance, which has been the preferred way to leverage your equity for the past two years. “, declares Werner LootExecutive Vice President of Direct Consumer Lending at US Bank.

What the Federal Reserve means for home equity loans and HELOCs

Throughout 2022, home equity loan and HELOC interest rates have continued to move in tandem with Fed rate hikes.

“The Fed is trying to break the economy and unfortunately it has to,” says Charles Wagner, partner at Biondo Investment Advisors. “Until they see less consumer spending and lower inflation, they’re going to keep raising rates.”

As a result, borrowing with a home equity loan or HELOC is going to get more expensive — and stay that way — until the Fed can take its foot off the gas pedal.

Even so, experts note increased interest in home equity products.

“Going forward, I think we’ll continue to see a back-and-forth between home equity burning a hole in consumers’ pockets and higher rates making that loan less attractive,” Channel says.

How to get home equity financing

To obtain home equity financing, you will need to complete an application with a lender of your choice. It doesn’t have to be the same lender through whom you took out your mortgage. Experts recommend shop to see who offers the best rate.

“Remember that the average rate is not the end, everything is everything. You should always do common sense things like raise your credit score and research lenders before applying,” says Channel. “You can potentially get rates above or below average depending on your personal circumstances.”

Another option is to get pre-qualified for home equity financing. “In many cases, you can do a loan estimate to get an idea of ​​both interest and principal. This can help determine your comfort level,” says Loots.

How to Use Home Equity

There is a lot of ways to use home equity loans and HELOCsbut the most common are home improvement and debt consolidation. Unlike targeted loans, home equity products offer great flexibility in how you choose to use them.

Think about how you use the equity in your property.

“I think it’s easy to get caught up in ‘What’s the stock market doing? What’s up with house prices? What’s the interest rate today? and then we fail to link it. to our broader goals and aspirations,” says Jamie HopkinsManaging Partner of Wealth Solutions at Carson Group.

As long as you can comfortably pay both interest and principal, borrowing against your home can be a more efficient and cheaper way to access capital than a personal loan.

Be aware of the risks: Your home is both your greatest asset and your biggest cost. If you fail to pay a home equity loan or HELOC, you risk losing your home.

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