Homeowners sitting on nearly $300,000 in potential equity are watching interest rates with keen anticipation this month, as financial experts predict a stable landscape for home equity borrowing.

The Federal Reserve's upcoming meeting in late January is casting a subtle shadow over home equity loan and home equity line of credit (HELOC) rates, with most specialists expecting minimal movement in the current mid-7 to low-8% range.

According to David Kakish, a home loan expert at Anchor Home Loans, HELOC rates are most likely to remain flat or potentially drift slightly lower. These variable rates are directly tied to the prime rate, which is influenced by the federal funds rate. Current projections from the CME Group's FedWatch Tool show an 83% probability that the Fed will maintain its existing 3.50 to 3.75% range.

Fixed-rate home equity loans present a slightly different scenario, as they are connected to longer-term bond yields. Karri Noble, senior vice president of home equity operations at loanDepot, emphasizes that rate increases are unlikely, with a more probable outcome being rate stagnation.

The potential for rate reductions hinges critically on upcoming economic indicators. December's jobs report and the Consumer Price Index, expected in early to mid-January, will be pivotal in determining potential rate movements. If these reports indicate economic softening, home equity loan rates could begin a gradual descent.

Rose Krieger, senior home loan specialist for Churchill Mortgage, notes that significant rate increases would require a complex combination of Fed rate increases and broader market volatility—a scenario currently viewed as improbable.

For homeowners considering tapping into their equity, experts recommend closely monitoring inflation trends and consulting with loan officers to understand potential rates and fees. While dramatic changes seem unlikely in January, the broader economic landscape suggests potential rate adjustments could emerge later in 2025 or 2026.