HELOC interest rates have been steadily declining in recent months.
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Another week, another set of critical data points.
After the Federal Reserve announced a continued pause in the federal funds rate on May 7, the Bureau of Labor Statistics is set to release its next inflation reading on May 13. That reading, for April, could go a long way toward assuaging concerns surrounding the battle to tame inflation – or it could reignite new ones. Now at just 2.4%, inflation declined in both February and March and is closing in on the Federal Reserve's target 2% goal, at which point additional cuts to the federal funds rate appear more likely.
So if inflation cools, interest rates may as well. And that could make borrowing with a whole range of products more affordable, particularly if you're a homeowner considering tapping into your home equity. With a home equity line of credit (HELOC), specifically, homeowners can do so with an average rate materially lower than what's available with many alternatives. But they should know when to act and what factors could impact their rate offers. Below, we'll examine what to know specifically about inflation and HELOC interest rates this week.
Start by seeing how low of a HELOC rate you'd be eligible for here.
Inflation and HELOC interest rates: What to watch this weekWant to secure a low HELOC interest rate now? Then it's critical to be aware of these three items:
The path of inflation: Inflation has come a long way from the 9.1% rate it hit in June 2022, the highest it had been in decades. Another decline this week could give the Federal Reserve the motivation it needs to cut interest rates when the bank meets again in June. Currently, the CME Group's FedWatch tool has a rate cut in June listed at an 8% likelihood and a rate cut in July at around a 42% likelihood. But that can and likely will change if the data shows that inflation fell in April, so be sure to pay attention to the data release on Tuesday morning for an opportunity to act.
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The response of lenders: Remember, lenders don't need to wait for an official rate cut (or hike) from the Fed to adjust their rate offers to borrowers. So, if this week's inflation reading is a positive one, don't be surprised to see HELOC rates come down in response. HELOC rates, overall, are down by around two full percentage points since September 2024 and they've already hit multiple two-year lows in the opening months of 2025.
Now at just 7.99% for eligible borrowers, don't be shocked to see rates here drop by a few basis points before the end of the week. That will not only be beneficial for prospective borrowers searching for a low rate, but it will also help current borrowers, as HELOC rates are variable and subject to change monthly, so those who already have a HELOC could see some relief as soon as June.
The long-term trajectory: Did inflation drop in April? And how far did it fall? What factors drove that movement? Will it continue to fall in the months to come or was this the last decline for the foreseeable future? These are all viable questions that will be asked as soon as the reading is released. The long-term trajectory for inflation, after all, will impact the long-term trajectory for borrowing rates, meaning HELOCs could very well continue their decline in the weeks and months to come, as long as inflation remains cool. Just be sure to price in any volatility here, too, as a variable rate could quickly become problematic if inflation rises and interest rates soon follow upward.
The bottom lineHELOC rates aren't determined randomly. Instead, they're driven by a variety of factors, of which inflation is a critical one. With news there expected this week, then, and with HELOCs on a relatively steady decline over the past year, homeowners considering this equity-borrowing option should be prepared to act. With the knowledge of the inflation and interest rate climates, and how it can impact HELOC rates both negatively and positively, homeowners can better set themselves up for long-term borrowing success.
Matt Richardson