HELOCs drop to two-year low, approaching 8%; home equity loans at their cheapest this year

The Federal Reserve may have left interest rates unchanged, but home equity products continue their downward ways. The average rate on a $30,000 home equity line of credit (HELOC) dropped one basis point to 8.03 percent, its lowest level since 2023, according to Bankrate’s national survey of lenders. Meanwhile, the average $30,000 home equity loan held steady at 8.37 percent, the cheapest it has been this year.

HELOC and home equity rates already have become more affordable in 2025, reflecting the central bank cuts late last year. Will they continue to plunge if the Fed stays on pause? “Existing HELOC borrowers won’t see further declines in their rates until the Fed resumes cutting interest rates,” says Greg McBride, chief financial analyst at Bankrate. “Prospective HELOC borrowers should be on the lookout for low-rate introductory offers, which can offer attractive terms for a period of time even if the Fed is on the sidelines and rates aren’t otherwise falling.”

What’s driving home equity rates today?

HELOCs and home equity loans are down substantially from the highs reached at the beginning of 2024, with HELOC rates hitting lows not seen in two years. McBride forecasts that rates will continue to decline in 2025, especially those of HELOCs. They will average 7.25 percent, he thinks — which would be their lowest level in three years.

The demand for HELOCs and HELoans is being driven by two factors: lender competition — as banks and mortgage companies try to attract applicants with low-for-a-limited-time loan terms — and the Federal Reserve’s actions. The central bank cut interest rates three times in late 2024, and indicated cuts would continue this year. It did hit the breaks on rate cuts at its first two meetings of 2025, though, moving cautiously as it keeps an eye on inflation and the employment rate. Also, in the backdrop, are concerns about a slowdown in the U.S. economy, reflecting the effects of the Trump administration policies like tariffs, mass deportations and federal worker layoffs.

“The biggest risks to home equity lending will be rising unemployment or sustained declines in home prices,” says McBride. “If the economy can sidestep both of those, it will remain a robust environment for home equity lenders.”

What influences home equity rates?

Several factors can influence interest rates on HELOCs and new home equity loans. That includes the prime rate, which is tied to Federal Reserve monetary policy. When the Fed raises rates, borrowing costs on equity-based loans tend to go up. The opposite tends to happen when it lowers rates.

To be sure, the Fed’s moves influence interest rates on a variety of credit products. However, because HELOCs and home equity loans are linked to your home as collateral, those 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.

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

The Fed’s monetary policy influences interest rate trends overall and the rates lenders advertise. Of course, the individualized offer you receive on a particular HELOC or new home equity loan reflects an additional factor: your creditworthiness — specifically your credit score and debt-to-income ratio. Then there’s the value of your home and your ownership stake, especially vis-à-vis the amount you want to borrow. Lenders generally allow all your home-based loans (including your mortgage) to be 80 to 85 percent of your home’s worth.

Some people may be more conservative in tapping their equity, since what’s paramount is “paying off the loan as fast as they can,” says Fred Bolstad, head of retail lending at U.S. Bank. “For other people, it’s all about [increasing] cash flow, and so they want to leverage their home to the fullest.”

• 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.