HELOC rates may not drop as Fed holds rates steady in June

As of June 5, 2025, homeowners in the United States are anxious about the direction of home equity line of credit (HELOC) rates following recent fluctuations. Average HELOC rates dropped significantly in 2024, but recently experienced a slight uptick, currently sitting at 8.14%. It is anticipated that the Federal Reserve's upcoming meeting on June 17 and 18 will influence these rates, but experts predict they will likely remain unchanged due to persistent economic uncertainty and inflation issues. With the Federal Reserve projected to keep the federal funds rate stable, any changes to HELOC rates may not occur until later in the year. Shmuel Shayowitz, president and chief lending officer at Approved Funding, highlighted the correlation between the federal funds rate and HELOC rates, emphasizing that changes in the Fed's rate will directly impact HELOC borrowing costs. Karen Mayfield, national head of originations at Multiply Mortgage, supports this outlook and mentions the possibility of small cuts in the second half of 2025 depending on economic indicators, although no cuts have yet been made this year. Thus, while borrowers are hoping for favorable rates, there is skepticism regarding immediate improvements in the wake of the June Federal Reserve meeting. Lenders may start to reduce HELOC rates preemptively if they sense the potential for rate cuts in the near future, especially if significant announcements follow the Fed meeting. This uncertainty is particularly relevant for those seeking affordable borrowing solutions as the variable rates associated with HELOCs can lead to significant changes in monthly payments. It is crucial for homeowners to stay informed about these developments as they navigate their borrowing options.