What's the home equity loan interest rate forecast for October 2025?

The Federal Reserve cut the federal funds rate for the first time in 2025 in September, influencing rates across a number of borrowing options, including home equity loans. These options, and in particular variable-rate home equity lines of credit (HELOCs), track short-term benchmarks like the prime rate, which often moves with the Fed rate. When that happens, a 0.25% Federal rate cut, for example, could quickly lower your monthly costs.

That's good news for millions of American homeowners starving for more affordable borrowing options, particularly after inflation ticked up 0.4% in August to 2.9%. That means the costs of everyday living are higher and the need for affordable borrowing options is more pronounced

Meanwhile, the Fed is signaling more rate adjustments are likely this year. With all this in mind, this month may be a critical time for borrowing rates. So what will happen with home equity loan rates in October? We asked some experts for their forecast.

Start by seeing how low your current home equity loan rate offers are here.

What's the home equity loan interest rate forecast for October?

Home equity rates are falling and may continue to do so if the Federal Reserve continues to signal rate cuts later in October. The CME Group's FedWatch tool forecasts a 92.5% likelihood the Fed will lower the federal funds rate at its meeting later this month. Lenders note that borrowing costs often adjust ahead of the Fed's official decision as markets price in expected moves.

Joe Perveiler, senior vice president and home lending product executive at PNC Bank, says the market is already responding to the Fed's hints of an interest rate cut. "Inflation has started to moderate and the Fed is signaling more cuts, which usually begins to bring borrowing costs lower," he says. 

Similarly, Matt Hanna, senior mortgage sales director at First Tech Federal Credit Union, expects modest movement in home equity rates in October. "There's optimism that we could see another dip in the federal funds rate, so I expect home equity rates to either remain static or drop a bit," he says.

However, he cautions that borrowers shouldn't expect an immediate drop in home equity loan rates, which is more gradual than it is for variable-rate HELOCs. "Lenders are still watching housing data and consumer spending closely to gauge risk and ensure responsible lending. If home prices hold steady and borrowing remains strong, that supports safer lending conditions," he says.

Compare your current HELOC and home equity loan rate offers here to learn more.

What other factors are impacting home equity rates right now?

Federal Reserve policy certainly impacts home equity rates directly, but it's not the only driver. "There are a number of factors playing into rates at the moment," says Alex Beene, a financial literacy instructor at the University of Tennessee at Martin. "Beyond Fed policy, inflation data, bond yields and the overall demand for credit are shaping home equity lending rates." 

Perveiler explains that national unemployment and inflation data can impact rates, but local conditions can as well. "We're also seeing local housing markets influence rates. In areas where home values have surged or stayed resilient, borrowers tend to have more equity to tap, which can lead to more competitive offers. In markets where that may not have been the case, rates may be a bit higher," he notes.

What should you consider before borrowing home equity?

Home equity loans, HELOCs and cash-out refinances can be beneficial financial tools, especially when they're used in the right way. However, they put your home at risk, since it serves as collateral on the loan. Whether it's a home equity product or any other loan, only take on new debt when necessary and run the numbers to ensure you can comfortably afford the monthly payment.

With potential rate cuts this month and December, you might think about whether to lock in a fixed rate now or choose a variable one. "As we are in a declining-rate market, it makes sense to consider if a HELOC fits your needs since you will see your rate come down with each rate cut, as opposed to a home equity loan, which has a fixed rate," says Sarah DeFlorio, vice president of mortgage banking at William Raveis Mortgage.

The bottom line

If you're considering tapping your home's equity for cash, keep an eye on average home equity rates to see whether they continue to decline. If you don't need the funds right away, or if you anticipate rates falling further, it may make sense to wait. HELOC borrowers could still benefit sooner, though, since those rates adjust with the market, but be aware those same rates could adjust upward in the future.

Still, timing the market is challenging, even for economists and financial analysts, so focus on the rate and terms you're offered and whether they fit your budget now. Get quotes from at least a few lenders to compare APRs, fees and repayment terms before deciding.