What the Fed's rate pause means for home equity loan, HELOC rates

The federal funds rate affects how much it costs banks to loan out money and, in turn, how much they charge borrowers. When the Fed raises the federal funds rate, the interest rates on new home equity loans and HELOCs also goes up. Conversely, when the Fed lowers the federal funds rate, interest rates on home equity loans and HELOCs also decrease.

The pause is also good news for those who have already taken out a HELOC. While home equity loan rates are fixed when you take out the loan, HELOC rates vary over the course of your repayment based on the federal funds rate. A rate freeze means you won't have to worry about paying more, at least in the short term. If you've been thinking of taking out a home equity loan or HELOC, now may be the time to do so.

That said, lenders are free to set their own rates, so it's important to shop around and compare rates from different lenders to find the best deal. It's also worth noting that the interest rate on a home equity loan or HELOC isn't the only factor to consider.

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