Latest news with #borrowingCosts
CBS News
18 hours ago
- Business
- CBS News
Will HELOC rates fall after the Fed's June meeting?
HELOC interest rates have declined significantly from where they were at the start of 2024. Getty Images Interest rates on home equity lines of credit (HELOCs) declined significantly between September 2024 and this spring, at one point dropping by more than two full percentage points. However, just when it seemed that HELOC rates were on a permanent decline, they ticked up again, moving into the 8% range after dropping into the 7% territory in early April. But after rising to 8.20% on May 21, they declined to 8.14% at the end of the month, and now, in June, some borrowers may be contemplating the potential for HELOC rates to fall again. A lower interest rate, after all, is always important, but especially so when borrowing with a HELOC. Since the product comes with a variable rate that is subject to change monthly, changes here could make monthly repayments considerably more affordable or more expensive. And with another Federal Reserve meeting slated for June 17 and June 18, at which monetary policy and the future of interest rates will be determined, homeowners may be wondering about the potential for HELOC rates to fall yet again. Below, we'll break down what to consider and what to do to keep overall home equity borrowing costs low. Start by seeing how low of a HELOC rate you'd qualify for here. Will HELOC rates fall after the Fed's June meeting? While predicting the future of interest rates is inherently difficult to do, the likelihood of average HELOC interest rates declining after the June Fed meeting will likely depend on what happens directly after the two-day meeting wraps up, not what actually happens in the meeting. At least this month. That's because the chances of a rate cut in the June meeting are low now. According to the CME Group's FedWatch tool, the likelihood that the central bank will keep the federal funds rate unchanged between a range of 4.25% and 4.50% is over 95% as of June 3. And while that trajectory could change if other economic indicators released before then encourage a rate cut, the chances of it happening as quickly as this June are low. But if comments made after the meeting by Federal Reserve chairman Jerome Powell indicate an imminent rate reduction (perhaps for when the Fed meets again in July), then rates on borrowing products like HELOCs could decline slightly. That's because lenders don't need to wait for a formal Fed rate action to adjust their offers to borrowers. If they feel that rate cuts are likely in the weeks ahead, they may start lowering HELOC rates preemptively. That said, if comments are geared toward higher rates for longer, HELOC rates could move up in a slight upward direction instead. Or they could remain static until further economic data is released. Fortunately, current borrowers and those considering a HELOC, thanks to its affordability, won't need to take any action to secure a lower rate. Since rates here change independently, payments will decline if the Fed takes rate-cutting action. Refinancing, as would be needed with a home equity loan, for example, won't be needed. So if you're confident that the rate climate will continue to cool and want to be well-positioned to exploit that decline, a HELOC could be the smart way to borrow money right now. Get started with a HELOC online today. What about home equity loans? The average home equity loan rate is now 8.24%, 10 basis points higher than the average HELOC rate, and while that may not seem advantageous on paper, it can still be the smart option for homeowners uncomfortable with a changing interest rate climate in today's economy. A home equity loan rate is fixed and will remain the same as it was when opened unless refinanced, giving homeowners peace of mind and predictable payments in an otherwise unpredictable economic climate. And, if rates were to decline materially at a later date, homeowners could always refinance and take advantage then. Just be sure to account for any home equity loan refinancing closing costs before making that move, as they could negate some of the savings you'd otherwise expect to see with a lower rate. The bottom line HELOC rates could decline after the Fed June meeting but they're more likely to remain around where they were at the beginning of June, barring any significant economic developments. But with rates here still much lower than most borrowing alternatives and with a comparable home equity loan rate available for homeowners concerned about rate volatility, there's likely a cost-effective way to borrow home equity now that won't also jeopardize your greater financial health. Just be sure to shop for rates, lenders and terms to find the optimal offer for your unique circumstances before formally applying. Learn more about your HELOC and home equity loan options here.
Bloomberg
2 days ago
- Business
- Bloomberg
S. Africa Central Bank Sees ‘Amazing' Chance to Lower CPI Goal
South Africa's current low level of inflation is an unmissable chance to reduce the country's inflation target and lock in the benefits of tame price pressures and cheaper borrowing costs. 'There is a really amazing opportunity right now,' David Fowkes, a member of the South African Reserve Bank's monetary policy committee, told an audience on Tuesday in Soweto, south of Johannesburg. 'This is surely the best opportunity we're ever going to get.'
Bloomberg
3 days ago
- Business
- Bloomberg
Putin's Central Banker Under Pressure to Cut Record-High Rates
The Bank of Russia's governor, who was praised for helping save the country's economy after the invasion of Ukraine, is facing mounting pressure to reverse course on record-high borrowing costs amid worries over their toll on business. The government expects Elvira Nabiullina to reduce the benchmark rate as the effect on the budget and civilian industries becomes more apparent, three officials familiar with the thinking in the Kremlin said, declining to be identified as the information is not public. Some are calling for the cut to come at the next central bank meeting on Friday.
Fox News
6 days ago
- Business
- Fox News
Invisible tax: Government debt is crushing your finances
Mortgage rates rose again this week, with the average 30-year fixed rate climbing past 6.8%. That's not just a post-pandemic hangover; it's a warning sign. Behind the scenes, rising government debt is putting steady upward pressure on borrowing costs. If your mortgage, car loan, or credit card payments are more expensive than they were a few years ago, you're not alone — and despite what you may have heard, it's not just because of inflation or Federal Reserve policy. The surge in federal borrowing is helping inflate interest rates across the board. If government debt had stayed at 2015 levels, the typical family could be paying $222 less per month on their mortgage. Go back to 2005 debt levels and the number jumps to $536. That's real money disappearing from household budgets not because of the jump in home prices, but because Washington can't stop borrowing. For years, economists puzzled over why interest rates kept falling. Aging populations, slower productivity, and foreign demand for American debt were all cited as reasons. One result was that Uncle Sam took advantage and racked up larger deficits and debt. After all, refinancing was affordable at low rates. Another was that Americans got used to lower monthly mortgage payments, auto loans, and other interest rate-related expenses. Now, we're grappling with interest rates that have surged and stayed stubbornly high. The change followed a torrent of unfunded federal spending in 2020 and especially 2021 which exploded the deficit, shook investor confidence in America's long-term fiscal stability, and caused bond markets to react to policymakers' fiscal bravado. My new research for the Mercatus Center at George Mason University, along with a growing body of economic literature, shows the debt itself is pushing up long-term interest rates — and by more than some experts are willing to admit. While broader economic changes and policy decisions also play roles, this particular problem is too big to ignore. Over time, as trillions of dollars in debt compound, the Treasury shells out hundreds of billions more in interest payments. It's not just a problem for Washington's balance sheet. It's a problem for yours. Economists have a term for what's happening: "crowding out." When the government borrows more, it competes with private borrowers for capital. And when two consumers want the same thing, the price usually goes up — in this case, the price of borrowing (interest rates). All kinds of important things become more expensive: mortgage payments, car loans, student loans, credit card debt. These are not abstract concerns. They determine whether plenty of families can afford to buy a home, send someone to college or buy a new car or truck. They determine whether someone can start or expand a business and provide more people with jobs. Take housing. Mortgage rates are now hovering near their highest levels in over 20 years. That's not because lumber or labor costs spiked, but because of the effects of federal borrowing. Student loan interest rates are tied to Treasury yields, which means college graduates are now repaying debt at the highest rates in almost two decades. Auto loan rates are rising too, pricing out lower-income consumers. For Americans with credit card debt (almost half of U.S. households carry a balance) the average interest rate is now around 20%, driven in part by the same upward pressure caused by growing federal debt. These debt-driven rate increases are an invisible tax on all of us. Families feel the squeeze every month. Businesses delay investments. Budding entrepreneurs face higher hurdles. Why aren't more economists talking about the problem? It's complicated. The Congressional Budget Office (CBO), for example, significantly underestimates the effect. Its latest projections assume long-term interest rates will stabilize at lower levels even as government debt as a share of the economy grows. But if debt pushes rates up more than the CBO predicts — as most empirical studies now show — then its rosy forecasts won't reflect how much the federal government will pay just in interest. Beyond our own households, there are consequences for the whole economy and government. Higher interest costs mean less money for education, infrastructure, or tax relief. They increase the risk of a debt spiral in which interest payments themselves become the fastest-growing part of the budget. Most people understand that the federal government's borrowing binge can't go on forever, and that it will burden future generations of taxpayers. But if you're between the ages of 19 and 99, the tax is probably already hitting you in some way each and every month. The cost of inaction isn't just abstract and long-term, it's concrete and already being felt. Just check your mortgage statement.
Washington Post
7 days ago
- Business
- Washington Post
Average rate on a US 30-year mortgage rises to 6.89%, its highest level since early February
The average rate on a 30-year mortgage in the U.S. rose this week to its highest level since early February, further pushing up borrowing costs for homebuyers. The rate increased to 6.89% from 6.86% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 7.03%. Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also rose. The average rate ticked up to 6.03% from 6.01% last week. It's still down from 6.36% a year ago, Freddie Mac said.
