The Federal Reserve has already signaled that rising interest rates are on the cards for 2022, but Bankrate has released a new forecast that predicts rates will be adjusted at least twice this year.

Two rate hikes mean rates will rise by more than half a percentage point, meaning the rate on a home equity line of credit (HELOC) will average 5.05% by the end of the year.

“For existing borrowers, the rate will mimic what the Fed is doing,” he said Greg McBride, Bankrate Chief Financial Analyst. “If the Fed hikes rates twice, expect your rates to be half a percentage point higher.”

“If you’re in the home loan market in 2022, you can expect the average interest rate to trend higher, increase more moderately, move about a quarter of a percentage point and end the year at 6.25 percent in response to the Fed,” McBride said continued.

What happened to home equity rates in 2021?

The Federal Reserve’s Federal Funds Rate directly affects market rates for home equity products — in 2021, these remained fairly low for home equity loans, ranging from 5.29% at the start of the year to 5.96% at the end of the year. The average HELOC interest rate at year-end was between 4.7% and 4.28%.

What to expect in 2022

Despite the imminent rise in interest rates, more people are expected to use their home equity this year and bring rising home prices into the equation to complete mainly home improvement projects.

“Home equity loans remain an attractive option for debt consolidation. Additionally, borrowers who have not refinanced their mortgage are still better off refinancing before considering a HELOC.”

Next Steps

If you’re thinking about a home equity loan or line of credit this year, consider the following:

• Existing HELOC borrowers are likely to see rate hikes of at least half a percentage point
• Existing home equity borrowers don’t have to worry about rising interest rates
• New borrowers for both products will see slightly higher interest rates and fewer special offers for new borrowers
• Homeowners who have refinanced their homes are in a great position to leverage home equity with a HELOC
• Borrowers looking to consolidate debt should consider a home equity loan