HELOC Borrowers Get a Break

When the Federal Reserve meets and changes rates, we all have questions: What does it mean to me? Will my HELOC rate go up or down? Bankrate is here to help. We've looked at five categories -- mortgages, home equity loans, auto loans, credit cards and certificates of deposit -- to determine if the Fed's moves made you a winner or a loser. Here's a look at home equity loans:

Home Equity

Winner: HELOC account holders
The Federal Reserve's decision to substantially slash the federal funds rate twice in little more than a week will sharply reduce borrowing costs for people who use home equity lines of credit to fund purchases.

Loser: Irresponsible HELOC account holders
As borrowing costs on HELOCs fall, some people may be tempted to jack up their spending. Going into debt is never a good idea, but it's especially dangerous during a time when the economy may be headed into a recession.

Loser: Home equity loan shoppers
None of the Federal Reserve rate cuts have made a dent in home equity loan rates. Average rates on these products have remained around 8 percent for more than six months.

Take action
The Federal Reserve has made deep cuts in interest rates since September, which makes borrowing from a home equity line of credit extremely attractive. In addition, unlike most forms of debt, the interest expenses on a HELOC typically are tax-deductible.

However, people who are too eager to borrow against their HELOCs often find themselves getting in over their heads. So, use those funds wisely -- if at all.

Wednesday's Rate Cut -- Who Stands to Win and Who Could Lose:
Mortgages | Home Equity | Auto Loans | CDs and MMAs | Credit Cards