HELOC And Home Equity Loan Rates Barely Budge

Image by GettyImages; Illustration by Bankrate

High summer’s heat may be making home equity rates sleepy. The average rate on a $30,000 home equity line of credit (HELOC) was unchanged at 8.27 percent for the fifth straight week, according to Bankrate’s national survey of lenders. The average rate on the $30,000 home equity loan barely stirred, moving two basis points up to 8.28 percent.

Since June of this year, average rates of HELOCs and home equity loans have been hovering in the same range — and are almost identical. So, how can homeowners decide which home equity product is the best option for them?

It depends partly on the reason for borrowing. “Homeowners with substantial equity who know exactly how much they need to borrow are ideal candidates for home equity loans. These loans are best for one-time, large-scale expenses like a full kitchen remodel,” says Eduardo Berain, executive vice president of banking, investments and insurance at Frost Bank, a Texas-based lender. In contrast, HELOCs work well if the exact sum needed is uncertain or if costs will be ongoing for several years.

But the borrower’s personal finances can be significant too. “Home equity loans are good options for homeowners with consistent cash flow,” Berain continues. “If a homeowner is expecting a financial windfall soon — for example, a bonus — a HELOC may be a better option.”

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’s monetary-policy moves especially impact the cost of variable-rate products like HELOCs.

Both HELOCs and home equity loans have declined substantially from the highs they hit at the beginning of 2024, although they have moved off this year’s lows. Bankrate Financial Analyst Stephen Kates forecasts HELOC and home equity loan rates to remain close to their current levels through the end of 2025, with HELOCs averaging 8 percent and home equity loans 8.10 percent. Much may depend on when — or even if — the Fed begins cutting benchmark interest rates again.

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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 Bankrate Chief Financial Analyst Greg 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.