If you’ve been considering getting a Home Equity Line of Credit (HELOC) to fund a home renovation project, you may want to act sooner rather than later. The Federal Reserve is indicating a likelihood of increasing interest rates in the near future, which could impact the cost of borrowing for a HELOC.
According to the CME Group’s FedWatch tool, the probability of a rate hike by the Fed is increasing with each meeting throughout the year. While the probability of an increase in June is currently low at 1.7%, it rises to 18% in September and jumps to 37.3% by December. This means that waiting too long to secure a HELOC could result in higher interest rates.
As of Saturday, May 30, 2026, the average HELOC rate stands at 7.21%, with the national average rate for a home equity loan at 7.36%. These rates are based on applicants with a minimum credit score of 780 and a maximum combined loan-to-value ratio (CLTV) of less than 70%.
HELOC and home equity loan interest rates are calculated differently than primary mortgage rates. Second mortgage rates are typically based on an index rate plus a margin, with the prime rate currently at 6.75%. Lenders may add a margin, such as 0.75%, resulting in a HELOC rate of 7.50%.
When shopping for a HELOC or home equity loan, it’s important to compare rates, fees, and repayment terms. Look for lenders offering below-market introductory rates, but be aware that these rates may only last for a limited time before converting to a variable rate.
For homeowners with low primary mortgage rates and significant equity in their homes, now may be an opportune time to consider a HELOC or home equity loan. These funds can be used for home improvements, repairs, upgrades, or any other financial needs.
When calculating the monthly payment on a HELOC, consider that the interest rate is variable, so payments may fluctuate over time. It’s important to have a repayment plan in place to ensure that the balance is paid off in a reasonable timeframe.
In conclusion, with the possibility of rising interest rates on the horizon, now may be a good time to explore your options for a HELOC or home equity loan. By comparing rates and terms from different lenders, you can find the best option to finance your home renovation project or other financial needs.
