HELOC rates are unlikely to fall further — and could rise if inflation reignites

HELOC rates are unlikely to drop much further and could climb if inflation reaccelerates, mortgage experts say. While rates have fallen from around 9% to about 7% over the past 18 months — including a decline in the first quarter of 2026 — the downward trend is stalling. The Federal Reserve has held the federal funds rate steady at its last two meetings, and that stability is expected to continue. Since HELOC interest rates are typically tied to the prime rate, which follows the Fed’s benchmark, any meaningful drop would require the central bank to cut rates. That’s not likely unless inflation cools significantly or the labor market weakens — conditions that experts view as improbable in the near term. The CME Group FedWatch tool shows a 98.4% chance the Fed will keep rates unchanged at its April 29 meeting. Instead, risks are tilting upward. Geopolitical tensions, particularly the Iran conflict, are pushing energy prices higher and feeding inflation expectations. If those pressures translate into hotter CPI readings, the Fed’s path to rate cuts narrows — and a hike becomes possible. For homeowners, that means the current low-7% range for HELOCs may be as good as it gets this year. Those seeking payment certainty might be better off with a fixed-rate home equity loan, which locks in the rate for the loan term, rather than a variable-rate HELOC.