Rates on home equity products moved lower this week.

The average home equity line of credit -- or HELOC -- fell 17 basis points, to 6.1 percent. Meanwhile, fixed-rate home equity loans slipped by 1 basis point, to 7.79 percent.

Rates on HELOCs will continue to plunge in coming weeks, thanks to the Federal Reserve's March 18 decision to cut the federal funds rate by 75 basis points. Most HELOCs are pegged to the prime rate, which moves in lock step with the federal funds rate.

By contrast, home equity loan rates are not as directly tied to changes in the federal funds rate. However, these rates have trended a bit lower in recent weeks.

The Wall Street Journal recently reported that lower HELOC rates enticed homeowners to borrow more from their equity lines in the fourth quarter of 2007 than in the previous quarter. This marks the first rise in HELOC borrowing since early 2005.

However, many lenders are beginning to restrict access to new and existing home equity lines of credit and loans. Lenders have become more cautious about these products for several reasons, including a recent wave of borrower defaults and sinking home values in many parts of the country.

-- Chris Kissell

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