HELOCS Drop, Home Equity Loans Hold Steady

Image by GettyImages; Illustration by Bankrate

Home equity line of credit (HELOC) rates have dipped to levels not seen since March 2023. The $30,000 home equity line of credit fell eight basis points to 7.82%, according to Bankrate’s national survey of lenders. Meanwhile, the benchmark 5-year $30,000 home equity loan was unchanged, holding at 8.02%, a two-year low.

Stability is returning to the housing market and driving fresh interest in HELOCs, says Lindsey Harn of Christie’s International, a real estate broker based in California. “People are taking on more debt, and they want liquidity to either buy another property or make home improvements,” she says. “Home equity lines provide a lot of flexibility with that.”   

Note: The home equity rates in this survey assume a line or loan amount of $30,000.

What’s driving home equity rates today?

Both HELOC and home equity loan rates have declined substantially from their 2024 highs. Rates are being driven primarily by two factors — the first one is the Federal Reserve’s actions. In particular, the Fed impacts the cost of variable-rate products, like HELOCs. After cutting rates by a quarter point at its September meeting, the central bank suggested it may lower borrowing costs two more times this year.

What could complicate matters for the Fed is the government shutdown, which is now the longest in history. The work stoppage has not only delayed crucial economic data, like the monthly jobs report, but it has also created greater economic uncertainty.

Add to that lender competition, promotional offers and underwriting standards, all of which also have an impact on HELOC and home equity loan rates, says Stephen Kates, senior analyst at Bankrate. But beyond rates, “Some banks offer additional perks or services that may benefit borrowers,” he says. “Shopping around and comparing multiple offers is the best way to secure a competitive rate and find a banking relationship that aligns with your financial goals.”

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.

While average rates are useful to know, the individual 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 the size of your ownership stake. Lenders generally limit all your home loans (including your mortgage) to a maximum of 80 to 85% of your home’s worth.

Keep in mind: Even if you’re able to secure a favorable rate from a lender, home equity products are still relatively high-cost debt.