Economic News Favors Low Rates on Home Equity Loans

[Feb 27, 2010.]

 

Interest rates on home equity loans should remain low for several more months. Poor economic news will likely convince the Federal Reserve that inflation is of little concern and that low interest rates are still necessary to bolster the struggling economy.

Most home equity loans are tied to the prime rate. When the Federal Reserve decides it is time to start raising rates to combat inflation and tighten monetary policy, it can start raising the Fed Funds Rate. Prime rate usually tracks the Fed Funds Rate plus 3%.

Economic News Summary Week of February 22, 2010

2/23/2010 - The Case Shiller home price index reports that home prices were down 2.5% for Q4 and 3.1% year over year. Consumer confidence drops 10 points to 46.0. The present situation indicator hits a 27 year low.

2/24/2010 - New home sales hit a record low of 309k, down 11.2% in January. Analysts believe extreme weather was a factor and that there should be a rally in February and March.

2/25/2010 - Jobless claims jumped unexpectedly. Federal Reserve Chairman Ben Bernanke gave testimony to Congress that US banks may be culpable of using credit default swaps to hide Greece's debt.

2/26/2010 - GDP is revised up slightly to 5.9% annual growth. Consumer spending is down 1.7%. Existing home sales are down 7.2%, well below expectations considering that the government's tax credits and artificially low interest rates are still in place. AIG reports an $8.9 billion loss for Q4 and says more tax payer assistance will be required.

New Quick Loans, Cheap Loans

Of all of the options you have when tapping the equity stored in your home, home equity loans are likely quick loans compared to the many other varieties of mortgages. They are also very cheap loans right now. As long as the prime rate remains in the 3% range, you may pay less on your home equity loans than on any other type of debt.

Consider using a new home equity loan to consolidate high interest credit cards or as an alternative to student loans. They are also excellent for making home repairs such as a new roof or remodeled kitchen.

 

About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.