Blog #15: Why Lower Interest Rates Won’t Explode Home Sales

There’s a lot of noise in the financial world right now, and one of the bigger hypotheticals being floated is what might happen to home sales if Donald Trump pressures the Federal Reserve to cut rates aggressively in 2026. Whether that’s likely or not is a matter of debate, but as a Certified Financial Planner, I’m more interested in helping you understand what such a shift could mean for your financial strategy—especially if you're sitting on a low-interest mortgage and a significant amount of home equity. If you're wondering if the people who locked in sub 3% loans are going to sell their homes if (when) rates get lowered or not, please keep reading...

Let’s take a common scenario I see today:

📌 The Situation

• You bought your home any time prior to 2022.

• You refinanced by 2022 and locked in an amazing 30-year fixed mortgage at around 2.9%.

• Thanks to the home price appreciation over the past 5+ years, you’re now sitting on $100,000 to $300,000+ in equity.

• You like your home. You’re not necessarily looking to sell.

• But you’re wondering: Is there a way to take advantage if rates drop again—even if I don’t refinance or move?

The answer is yes—and it’s called a HELOC.

🏡 What Is a HELOC (Home Equity Line of Credit)?

A HELOC is essentially a revolving credit line secured by your home. It works similarly to a credit card, but with much lower interest rates—especially when rates drop.

With a HELOC, you can:

• Borrow only what you need

• Repay and re-borrow during the draw period (typically 5–10 years)

• Use the funds for home improvements, debt consolidation, investments, or emergencies

🧠 Why a HELOC Could Make Sense if Rates Drop

Let’s say the Trump administration exerts pressure on the Fed and rates fall meaningfully over the next couple of years. Mortgage rates, including variable-rate products like HELOCs, could follow. You wouldn’t want to refinance your 2.9% mortgage—why trade a fantastic rate for a higher one? But you could tap into your home’s equity at favorable rates without touching that mortgage.

In this scenario, a HELOC offers:

• Liquidity: Access to cash without selling assets or refinancing.

• Flexibility: Use only what you need, when you need it.

• Leverage: Turn idle equity into a tool for building more wealth.

💡 How Homeowners Are Using HELOCs in a Lower Rate Environment

1. Renovating to Add Value: Updating kitchens, adding energy-efficient upgrades, or finishing a basement—all of which can increase your home’s value.

2. Debt Consolidation: Paying off high-interest credit cards or personal loans at a much lower rate.

3. Bridge Financing: Planning to buy another home or investment property? A HELOC can provide short-term liquidity.

4. Emergency Fund Buffer: HELOCs can act as a low-cost emergency backup if your cash reserves are limited.

⚠️ Things to Consider Before Opening a HELOC

Even if rates drop, HELOCs often come with variable rates, so your payment could go up later. Also:

• Your home is the collateral. If you can’t repay, foreclosure is possible.

• Lenders will consider your income, credit score, and debt-to-income ratio.

• There may be upfront fees or annual maintenance costs.

A HELOC shouldn’t be used as a piggy bank for lifestyle inflation—but as a smart financial tool when used strategically.

🧾 Final Thoughts

If you’re one of the millions of homeowners sitting on record equity and a rock-bottom mortgage, you’re in an enviable position. Don’t mess with your primary mortgage if you don’t have to. But if interest rates fall due to political or economic pressure, as some speculate might happen under a newly appointed Fed Chair (goodbye Jerome Powell), then a well-managed HELOC could be a powerful move.

If your home is one of your biggest financial assets, you may want to make it work for you—but only if done wisely.

If you're curious about whether a HELOC makes sense for your situation, let’s talk. A quick strategy session can help you evaluate the pros and cons specific to your goals.

Tom Arasz, CFP®

Disclosures: This blog is for informational purposes only and does not constitute financial or investment advice. Please consult with your financial advisor or tax professional regarding your individual situation.