Will home equity loan interest rates fall this February?

Thanks to the home serving as collateral, interest rates on home equity loans tend to be lower than what’s offered with many popular alternatives like credit cards and personal loans. And, in 2024, that rate differential became starker as home equity loan rates steadily declined for much of the year, while rates on products like credit cards surged to a record high. 

Currently, the average credit card interest rate sits close to 23% while the average home equity loan interest rate is just 8.44% (as of January 31). That makes home equity loans almost three times cheaper than credit cards. And, unlike credit cards, home equity loan rates are fixed, allowing savers to secure peace of mind that they’d otherwise forego with a constantly changing interest rate.

But prospective borrowers, as well as current home equity loan users, may be wondering about the future of home equity loan interest rates, particularly now, after the Federal Reserve paused its interest rate cut campaign this week. So, will home equity loan interest rates fall in February or are they likely to remain the same? That’s what we’ll break down below.

Start by seeing what home equity loan interest rate you’d be eligible for here.

Will home equity loan interest rates fall this February?

Predicting the future of interest rates on any product is inherently difficult to do and should be approached cautiously. That said, the chances of home equity loan rates declining further in a material way in February appear to be small right now. Home equity loan rates are driven by an interwoven set of complex factors, of which the Federal Reserve’s monetary policy functions as a key impactor. But, in February, there’s no scheduled Federal Reserve meeting. So no cuts or hikes to the federal funds rate will take place in the month (the Fed doesn’t meet again until March 18 and March 19). 

Home equity loan interest rates could fall, however, if broader economic factors point to an inevitable, sooner-than-anticipated Fed cut. So, if inflation drops dramatically in January, for example, a reading released in February could cause home equity loan rates to fall slightly. That’s because lenders don’t have to wait for the Fed to take formal action to tweak the offers they provide to borrowers. And if lenders feel like the inflation data or other factors are strong enough to encourage the Fed to cut rates, they may start doing so independently before that’s official. 

This works both ways, however, and if economic readings are poor, rates could tick up in response, too. So if you know you want to borrow with a home equity loan, have the credit score to secure a low rate, and want to have the funds disbursed sooner than later, it still makes sense to apply in February to lock in a low rate. Should rates fall significantly in the months ahead, you can always refinance to the new, lower rate then.

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The bottom line

Today’s home equity loan interest rates will likely stay around the same in February, absent any dramatic economic changes or surprising economic data releases. But that doesn’t mean prospective borrowers should wait to act. Instead, they should use the month and the predicted stability to spend the time shopping for lenders and comparing rates and terms. These terms must be affordable to avoid losing the home to the lender. With a relatively stable interest rate climate in February, however, homeowners can spend more time evaluating their options and, hopefully, setting themselves up for home equity borrowing success for months and years ahead.