According to the Wall Street Journal, home equity rates have been falling steadily for the past 6 months and may fall further based on yesterday’s federal rate cuts:

Rates on home-equity lines of credit have dropped to 6.27% from 8.25% since September of last year, according to Bankrate.com. Partly as a result, the amount that homeowners borrowed against their lines of credit rose slightly in the fourth quarter of 2007 — the first such rise since early 2005, according to data from Equifax Inc. and Moody’s Economy.com. Rates on home-equity lines of credit should fall further after the Fed’s latest cuts, but that might have less effect than would ordinarily be expected, as some banks make these loans harder to get…

Indeed, mortgage brokers say their customers are having a harder time borrowing against the equity in their homes. “We’re seeing a lot of lenders freezing whatever is outstanding,” says Mitch Ohlbaum, a mortgage broker with Legend Mortgage Corp. in Los Angeles. He says some clients, worried about getting cut off from existing lines of credit, have started drawing down their lines in a pre-emptive move.

“They’re putting the money into savings accounts and CDs because they’re afraid they’re going to lose access to the funds,” he says. “It’s their safety net.”

It can be difficult to qualify for a HELOC in today’s market, but it’s not impossible. Even Countrywide (who sent out over 100,000 HELOC freeze notices earlier this year) is still advertising for new home equity borrowers.

See Also:

Will Federal Rate Cuts Affect Your HELOC APR?

What to Do if You’re Hit by the HELOC Freeze 

Tags | Heloc, home equity loan, lenders, loans, mortgage rates