Increases to the federal funds rate determine what banks charge each other to borrow money. The central bank has been hiking interest rates in an effort to bring inflation back down to its 2% target. Both the 10-year, $30,000 home equity loan and the 15-year, $30,000 home equity loan saw their average rates rise by 0.01% from the previous week. This week, interest rates for home equity loans inched up just slightly. Current home equity loan rates and trends The averages are determined from a survey of the top 10 banks in the top 10 US markets. Note: These rates come from a survey conducted by CNET’s sister site Bankrate. Here are the average rates for home equity loans and home equity lines of credit, as of May 17, 2023. If you have 15% to 20% of equity in your home and are considering tapping into it, here’s everything you need to know about how home equity loans work and where to find the best rates. Home equity loans are commonly used to make home improvements, such as adding solar panels or renovating a kitchen, that will in turn increase the value of your home. When leveraging your home’s equity, consider what you’re going to do with the funds as well as how you plan to pay the loan back. If you miss multiple payments, you could lose your home. While home equity loans offer more competitive interest rates than personal loans and credit cards, they come with a major risk. “So, if inflation isn’t under control they’re going to take stronger action and that’s what would result in higher rates,” he added. “Ultimately, I think will be driven by the pace of inflation, because that’s what the Fed is trying to control by raising rates,” Cook said. Instead, the Fed is expected to hold rates steady until inflation nears its 2% target. In addition, the Fed has signaled that ongoing rate increases may no longer be necessary. The most recent Consumer Price Index shows inflation at 4.9% in April, a slight decrease from March’s 5.0% figure. “So may not change things unless there’s a surprise in inflation data.” “What’s already priced into the market is an expectation of a certain pace of increases,” said Rob Cook, vice president of marketing, digital and analytics for Discover Home Loans. While interest rates for home equity loans track changes to the federal funds rate, the most recent Fed hike may not have a huge impact on rates already hovering around 8%. To tamp down persistent inflation, the central bank has hiked interest rates 10 times since last March. A home equity loan lets you turn your home’s equity into cash, but don’t expect interest rates to fall any time soon.ĭuring its May meeting, the Federal Reserve announced a 25-basis-point (or 0.25%) increase to its benchmark federal funds rate.
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