The Federal Reserve lowered the benchmark federal funds rate by 25 basis points this December, bringing it to a range of 3.50% to 3.75%. This marks the third cut since September, and the lowest level for the rate since November 2022. While the broader economic effects are still unfolding, borrowers are already seeing modest improvements in loan affordability, particularly for those tapping into their home equity.
Homeowners considering a $50,000 home equity loan may now benefit from slightly reduced monthly costs. These changes, while not dramatic, reflect a positive trend for consumers as lending conditions gradually improve. The drop in rates comes amid rising home equity levels nationwide, which may encourage more homeowners to explore financing options.
Lower Fed Rate Nudges Down Home Equity Loan Costs
Following the December rate adjustment, average home equity loan rates have edged down slightly, offering some relief to borrowers. According to data cited by Bankrate and CBS News, the average fixed interest rate for a 10-year home equity loan is now 8.18%, down from 8.43% in September. For a 15-year term, the average rate stands at 8.13%, also marginally lower than previous months. At these rates, a $50,000 home equity loan would cost:
- $611.40 per month on a 10-year repayment plan
- $481.59 per month on a 15-year repayment plan
In comparison, October figures showed average costs of $612.20 and $480.72 respectively, indicating a modest drop in monthly payments. While the change may seem incremental, it signals a larger trend of easing borrowing conditions.
These reductions align with a broader cooling of interest rates on secured consumer credit products. HELOCs (home equity lines of credit), which have variable rates, have also become more affordable. As of last week, the average HELOC rate had dropped to 7.81%, down from 9%–11% ranges recorded in late 2024, according to Bankrate.
Still, experts advise caution. The actual rate offered to borrowers will vary depending on individual factors such as credit score, loan-to-value ratio, and income stability. As a result, shopping around for different lenders remains a critical step.
Savings Depend on Terms, Lenders, and Credit Profiles
The impact of the Fed’s rate cuts is not being felt equally across all loan types or borrower profiles. For instance, while mortgage rates have remained mostly flat since mid-September, hovering near 6.19%, home equity loan rates have seen more movement, especially among shorter-term fixed products.
That said, not all financial institutions adjust rates at the same pace. Online lenders and credit unions may react more quickly than traditional banks. “The lender who currently holds your mortgage could be offering the best home equity rates and terms right now … or they may not be.” CBS News notes, adding that borrowers should not assume loyalty guarantees the best deal.
Additionally, rate adjustments on home equity products tend to lag behind Fed decisions. Lenders often wait to observe broader market responses before recalibrating their own rates, meaning further reductions may occur in the coming weeks. Consumers are also encouraged to negotiate rates, especially if they have strong financial profiles. In many cases, presenting competing offers from other lenders can lead to better terms, even from one’s existing bank.
With more Fed action likely paused for now, after officials signaled a possible hold in future rate cuts, current conditions may be a window of opportunity for qualified borrowers seeking affordable access to funds.
A $50,000 home equity loan is now slightly more affordable thanks to recent monetary policy shifts. While the savings are not substantial yet, the direction of change is clear. As lenders adjust and competition grows, borrowers who shop strategically and compare offers stand the best chance of locking in favorable rates.
