By now, most people have heard that the Federal Reserve has “paused” its relentless interest rate increases after seventeen consecutive quarter-point hikes.

The pause is generally seen as a temporary “wait and see” step and that a resumption of rate increases is a definite, perhaps likely, possibility.

Still, the announced pause is an action warmly welcomed by HELOC borrowers who have seen average rates on their loans rise from the 4.50% range to nearly 8.75% over the course of the Fed’s rate hikes. Most HELOCs are indexed to the prime rate which moves lock-step with Fed rate changes.

But the news may get even better for HELOC users. According to a report in the Wall Street Journal (August 9, 2006), the historical record shows that when the Fed “pauses” in a rising rate environment, it has signaled a rate peak. The Journal’s James B. Stewart reports:

“I was curious to see just when the Fed last paused in a rate-raising campaign, in the sense that it stopped increasing rates for one or more meetings, and then resumed. I looked at every Fed rate decision since 1914, and guess what? The Fed has never paused in a campaign to raise rates. Sometimes it has held rates constant for several meetings, but the next move has always been a cut.”

Of course, there’s always a first time. But HELOC users who’ve been spent most of the last two years strategizing ways to lock in rates on their loan balances may want to carefully consider whether holdin on to their variable rate HELOC may be the smarter move at this juncture.

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