Lukewarm hot water often indicates a broken dip tube thermostat issue or undersized water heater for your household demand. Check the thermostat setting ensuring it is at 120 degrees Fahrenheit. Electric heaters may have a failed lower heating element. Sediment buildup insulates water from the heating source. A broken dip tube allows cold water to mix with hot water at the top of the tank. Cross-connected pipes between hot and cold lines can also cause this.