With the Fed standing pat on short-term rates, what are the smart moves for you to make?

Home equity loans:
Home equity loan rates tend to follow the prime rate, though rates on longer-term loans (those with terms of 10 years or 15 years, for instance) behave more like long-term, fixed-rate mortgage rates.

In Bankrate.com’s weekly rate survey, home equity loans had an average rate of 7.23 percent Aug. 6. They were slightly higher, at an average of 7.34 percent, on June 25, the day the Federal Reserve cut short-term rates by one-quarter of a percentage point.

The average rate for home equity loans will drop further in the coming months. Lenders usually adjust rates, up or down, periodically — usually at the end of the month, and not always every month. That’s why the average home equity rate hasn’t dropped a quarter of a point yet.

Best move now:
You should always comparison-shop for loans, and that’s the case now. Experts are split on whether the Fed’s next move will be to move rates up or down, and most believe the Fed won’t touch rates for a while, anyway. Don’t time your home equity loan based on guesswork about what the Fed might do. If you need to get a home equity loan, go ahead. Use
Bankrate’s home equity loan search engine to find the best rates in your area. You’ll find the lowest rates on the shortest-term loans (say, three to five years).

Use Bankrate’s home equity loan search engine to find the best rates in your area. You’ll find the lowest rates on the shortest-term loans (say, three to five years).

Home equity lines of credit:
Most equity lines of credit feature variable rates and payments tied to the prime rate, which moves up and down with Fed rate actions. Rates for equity lines of credit averaged 4.56 percent Aug. 6, largely reflecting the Fed’s quarter-point rate cut June 25. Search for the best HELOC rate in your area.

Best move now:
The prime rate will rise eventually, making a line of credit more expensive, but no one knows when the Fed will raise short-term rates — maybe late this year, maybe not until 2005. If you want to tap your home’s equity periodically — to pay for a series of home improvements, or for college tuition — a HELOC is a fine choice. If you want to borrow a lot and can pay it back quickly, before the rates rise, HELOCs are for you, too.

Search for the best HELOC rate in your area.