When will home equity loan rates fall below 8%? Experts offer their predictions

It could soon be a bit easier to find a home equity borrowing rate under 8%, experts say. DEV IMAGES/Getty Images

Last month, the Federal Reserve lowered its benchmark rate for the first time in 2025, and according to expert forecasts, there's a good chance of more Fed rate cuts later this year. For borrowers, that means lower interest rates are likely on the horizon.

With this in mind, many homeowners might be thinking about borrowing from their home equity, especially considering that the average homeowner has over $300,000 worth of it to tap. But how low could home equity loan rates drop this fall? And could they fall below the 8% mark for the first time in a while? 

Find out how affordable today's home equity borrowing options could be here.

When will home equity loan rates fall below 8%? Experts offer their predictions

Here's what experts think could happen with home equity rates in the coming weeks and months.

The Fed will cut rates further

The Federal Reserve's moves play a big role in the overall interest rate environment nationwide. And, generally speaking, home equity loan rates tend to follow a similar trajectory to the Fed's rate, so when the Fed rate rises, you will usually see home equity loan rates rise — and vice versa.

"This will truly be up to the Fed. If they have now made their last move for the year, then I would expect rates to remain as they are now. If the Fed drops their rates, most often so will lenders," Mark Worthington, home loan expert at Churchill Mortgage, says. 

According to the CME Group's FedWatch Tool, there's about a 95% chance that the Fed cuts rates at its October meeting. At its December meeting, there's a chance of a rate cut as well.

"I'm expecting two more rate cuts this year for the Federal Reserve," says Jeremy Schachter, branch manager at Fairway Independent Mortgage.

Compare your home equity loan and HELOC options to find the right fit now.

Home equity loan rates may fall in tandem

The Federal Reserve already made one cut to its federal funds rate this year, and that resulted in lower mortgage and home equity loan rates. Given where Fed rates are likely headed over the next few months, mortgage pros say that rates on home equity loans should drop even further as the year goes on. 

"Home equity and HELOC rates are directly tied to the prime rate, which is influenced by the federal funds rate," says Brian Shahwan, vice president and mortgage banker at William Raveis Mortgage. "So, as we see the Fed continue to cut the fed funds rate, we will also see home equity and HELOC rates dropping in tandem. In my experience, most lenders automatically adjust rates as the Fed increases or cuts the federal funds rate."

The latest projections show that the Fed is expected to cut rates by another 50 basis points by the end of the year. 

"This is after they cut 25 basis points in September," Shahwan says. "If this turns out to be a reality, borrowers can expect to see HELOC and home equity rates drop by 0.5% by 2025's year-end."

Home equity rates below 8% are then possible

Currently, the average rate on a home equity loan ranges from 8.15% to 8.30%, depending on the term. So, if a 0.5% drop is possible by the end of the year, then sub-8% rates are, too. And, in some cases, home equity lenders are already offering these types of rates.

"Depending upon the loan size and equity, I am already seeing some lenders below 8%," Worthington says. "If the Fed continues to lower the prime rate, we will see even more lenders move in this direction."

Shahwan says he's even seeing lenders offer home equity borrowing rates as low as 7.5% in certain markets. 

"That's much lower than the overall national average," Shahwan says. "If the Fed cuts two more times before year-end, today's 7.5% will drop to 7%."

If you're looking to get a lower rate when tapping your home equity, a home equity line of credit (HELOC) might be worth considering, too. In recent months, HELOCs have actually had lower average rates than home equity loans (though this isn't typically the norm).

You can also shop around for your loan, comparing rates, fees, and loan products from several home equity lenders. 

"Every lender has a choice," Worthington says. "Reaching out to more than one lender is key."

The bottom line

Home equity loan rates are likely to keep falling in the months ahead, especially if the Fed follows through with additional rate cuts this year. That could open the door to sub-8% rates becoming more widely available, and in some cases, even lower than that.

If you're considering tapping your home equity, now is a smart time to start exploring your options. By comparing offers from multiple lenders, you'll be in a better position to lock in one of these more competitive rates as they emerge.

Edited by Angelica Leicht