HELOCs And Home Equity Loan Rates Down This Week

Image by GettyImages; Illustration by Bankrate

A novelty: movement in HELOCs and home equity loans in the latest week. The average rate on a $30,000 home equity line of credit (HELOC) not only changed but fell for the first time in more than a month, dropping one basis point to 8.26 percent, according to Bankrate’s national survey of lenders. Meanwhile, the average rate on the $30,000 home equity loan tumbled three basis points to 8.25 percent.

While home equity rates have traded in a tight range this month, they are still lower than personal loan rates, which currently average 12.64 percent, and especially credit card rates, which average 20.13 percent. That’s why now may be the right time to tap into your home’s value, says Tom Hutchens, president of Angel Oak Mortgage Solutions, a non-QM wholesale lender based in Atlanta.

“Everybody has all of this equity, yet at the same time, record levels of credit card debt,” he says. “That’s pretty bad financial management to pay high [credit card] interest rates when you have all of this accessible equity.”

What’s driving home equity rates today?

Rates on HELOCs and home equity loans are being driven primarily by two factors: lender competition for new customers and the Federal Reserve’s actions. The Fed especially impacts the cost of variable-rate products like HELOCs.

Both HELOCs and home equity loans have declined substantially from their highs reached at the beginning of 2024, although they have moved off the lows they achieved this year. Bankrate Chief Financial Analyst Greg McBride still forecasts that rates will decline in 2025, with HELOCs averaging 7.25 percent and home equity loans coming in at 7.90 percent. “Both are still well within the realm of possibility if the Fed resumes cutting interest rates in the second half of the year,” he says.

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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 and financials. 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 favorable rate from a lender, home equity products are relatively high-cost debt, notes McBride. “Many homeowners are sitting on a mountain of home equity, but borrowing against it is still costly, with the average rate still over 8 percent and many lenders charging double-digit interest rates,” he says. “This is not the low-cost form of borrowing that homeowners had become accustomed to for many years.

“Today’s rates are nothing to get excited about,” he adds. So if you must borrow, have a game plan for paying it back.”

• 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.