HELOCs Retreat, Home Equity Loans Rise A Bit

Image by GettyImages; Illustration by Bankrate

After rising for the last few weeks, the average rate on a $30,000 home equity line of credit (HELOC) reversed course, falling six basis points to 8.14 percent, according to Bankrate’s national survey of lenders. Meanwhile, the average rate on the $30,000 home equity loan at 8.24 percent was up a bit, but remained near its lowest level this year. Longer-term loans were virtually flat.

Even though rates are once again above 8 percent, now is a good time for prospective borrowers to consider a HELOC, says Michael Brennan, president of Nationwide Mortgage Bankers, a lender based in New York. “Waiting around for rate changes is a fool’s errand if you’re looking to borrow right now, especially with home equity currently at an all-time high in the U.S. HELOCs are a smarter way to pay off unexpected expenses, finance home repairs, or consolidate debt at a much lower rate than a credit card. You just have to be smart about not borrowing more than you need.”

What’s driving home equity rates today?

Rates on HELOCs and home equity loans have been driven by two primary factors: lender competition for the lowest-for-a-limited-time terms and the Federal Reserve’s actions. The Fed especially impacts the cost of variable-rate products, including HELOCs.

HELOCs and home equity loans have fallen substantially from the highs they hit at the beginning of 2024, with HELOC rates in particular reaching lows not seen since 2023. Bankrate Chief Financial Analyst Greg McBride forecasts that rates will continue to decline in 2025 — especially those on HELOCs, potentially to their lowest level in three years.

Current home equity rates vs. rates on other types of credit

Because HELOCs and home equity loans use your home as collateral, their rates tend to be much less expensive — more akin to current mortgage rates — than the interest charged on credit cards or personal loans, which aren’t secured.

Of course, the individualized offer you receive on a particular HELOC or new home equity loan reflects additional factors like your creditworthiness. Then there’s the value of your home and your ownership stake. Lenders generally limit all your home-based loans (including your mortgage) to a maximum 80 to 85 percent of your home’s worth.

Even if you are able to secure a low rate from a lender, as Ted Rossman, senior industry analyst at Bankrate, notes, home equity products are still relatively high-cost debt.

“Three years ago, the average HELOC rate was below 4 percent,” Rossman says. “I just wouldn’t be in a rush to borrow $50,000 for a home renovation at 8 percent if there’s a chance you might regret it, like if you lose your job, if you could have held off, if tariffs aren’t as bad as feared, etc.”

• Methodology
  

  The Bankrate.com national survey of large lenders is conducted weekly. To conduct the National Average survey, Bankrate obtains rate information from the 10 largest banks and thrifts in 10 large U.S. markets. In the Bankrate.com national survey, our Market Analysis team gathers rates and/or yields on banking deposits, loans and mortgages. We’ve conducted this survey in the same manner for more than 30 years, and because it’s consistently done the way it is, it gives an accurate national apples-to-apples comparison.