If you have a home equity line of credit or you are thinking about opening one, the latest move from the Federal Reserve may already be nudging your costs lower. In September 2025 the Fed reduced its benchmark rate by 0.25 percentage points, the first cut of the year and possibly not the last. Variable-rate borrowing tends to feel these shifts first, and HELOCs are among the quickest to adjust as lenders reprice. That means monthly payments on outstanding balances can ease, sometimes within a billing cycle. The change may be modest at first, but on a six-figure balance it can still add up.
Why HELOCs are getting attention
A HELOC provides a revolving line of credit that is secured by your home’s equity, so you can borrow, repay, and borrow again up to an approved limit. With home equity at record levels in many markets, tapping a $100,000 line has become more feasible for qualified homeowners. That can be appealing for big-ticket projects, emergency liquidity, or consolidating higher-cost debt. There can also be potential tax advantages when the funds are used for eligible home improvements, which may make the after-tax cost lower. Because the line is backed by your home, rates are typically lower than those on unsecured credit, but the stakes are higher.
The current rate environment
HELOC pricing moved down after the Fed’s cut, with average rates now at their lowest since March 2025, according to Bankrate data. HELOCs do not track the Fed one-for-one, but they are influenced by the broader rate climate and can shift quickly as lenders adjust margins and promotions. If the overall rate environment continues to soften, variable-rate HELOC borrowing could become more affordable in the months ahead. Timing and lender practices vary, so two borrowers can see different speeds and sizes of adjustment. It pays to monitor your statement and ask your lender how and when changes flow through to your rate.
What a $100,000 HELOC costs each month
Projecting long-term costs on a HELOC requires assumptions because rates can reset monthly during the draw period. Many lenders require interest-only payments while you are drawing, followed later by a repayment phase that amortizes the balance. To give a sense of affordability today, consider a $100,000 outstanding balance with a representative current rate of about 8.5 percent. An interest-only payment at that rate would be roughly $708 per month. If rates fall another 0.25 percentage points to 8.25 percent, the payment would drop to about $688, while a rise to 8.75 percent would lift it to about $729.
The takeaway is that a quarter-point move changes the monthly payment on a $100,000 balance by about $21. Over a year that is roughly $250 in either direction, and the effect compounds if your balance is larger or if rates move more than once. Compared with last September, when average HELOC rates hovered near 9 percent, today’s typical payment is meaningfully lower. At 9 percent, an interest-only payment on the same $100,000 would be about $750 per month, roughly $42 more than at 8.5 percent. That difference can free up cash for your project budget or help you pay down principal faster.
Risks and trade-offs to weigh
Variable-rate exposure means your payment can rise if rates move higher, so model multiple rate paths and stress-test your budget before you commit. Remember that your home is the collateral, and missed payments can put your ownership at risk. Because the rate floats, borrowing over a decade or more introduces uncertainty about total interest paid, especially if the draw period lasts 10 to 15 years. Product terms vary by lender, including the margin over prime, periodic and lifetime caps or floors, fees, and whether payments during the draw are interest-only or include principal. Tax treatment depends on how you use the funds and on your individual situation, so verify deductibility with a qualified professional before assuming a benefit.
Smart steps before you borrow
Start by shopping widely. Compare not only the advertised rate but also the margin, fees, introductory offers, and any rate caps or floors that could shape your costs later. Run personalized calculations using current quotes, then test scenarios with rates down 0.25 percentage points and up 0.25 percentage points so you understand your payment range. Align your borrowing plan with your cash flow and project timeline, drawing funds in phases so you only pay interest on what you actually use. Confirm potential tax benefits if you are funding home improvements, and get clarity on all payment rules during the draw period and after it ends.
The bottom line
With rates easing, HELOCs are cheaper than they were a year ago and could become more affordable if the rate backdrop continues to improve. That said, the floating-rate structure and the fact that your home secures the line call for careful planning. Shop offers, model multiple rate scenarios, and read the fine print so you can use a HELOC effectively and safely. A disciplined approach can help you capture today’s savings while staying prepared for tomorrow’s rate moves.