HELOCs Drop to Lowest Level in Three Years; Home equity rates rise slightly

HELOC rates took a big drop in the last week, falling to three-year lows. The $30,000 home equity line of credit plunged 78 basis points to 7.44% as a major lender resumed promotions, according to Bankrate’s national lender survey. Meanwhile, the benchmark five-year $30,000 home equity loan rose one basis point to 7.98%.

Ted Rossman, senior industry analyst at Bankrate, puts HELOC’s two-week roller coaster ride into context.

“Overall, it’s a declining interest rate environment for HELOCs and home equity loans, although we had a hiccup last week when Bank of America ended a HELOC promotion, causing the average HELOC to rise more than half a percentage point,” he says. “A couple of years ago, the average HELOC rate was around 10%, while the average home equity loan charged around 9%. With rates perhaps approaching 7% by the end of the year, it is becoming more attractive to use home equity for purposes such as home improvements and debt consolidation.”

Home equity rates are primarily driven by two factors: Federal Reserve policy and long-term inflation expectations. The Federal Reserve cut rates three times in 2025, sending HELOCs and home equity loans to their lowest levels in two years.

More relief could be on the way in 2026. Rossman predicts that home equity rates will continue to decline if the Federal Reserve implements the three-quarter-point cuts currently projected for 2026.

According to Rossman, the Federal Reserve is now more focused on labor market conditions than inflation pressures. He believes the economy will remain in good shape this year and that could increase appetite for home equity loans. “That could also put a little downward pressure on rates,” he says.

Learn more: How the Federal Reserve Affects HELOCs and Home Equity Loans

Because HELOCs and home equity loans use your home as collateral, their rates tend to be much less expensive (closer to current mortgage rates) than the interest charged on credit cards or personal loans, which are unsecured.

While it’s helpful to know average rates, the individual offer you receive on a particular HELOC or new home equity loan reflects additional factors, such as your creditworthiness and finances. Then there’s the value of your home and the size of your ownership interest. Lenders generally limit all of your home loans (including your mortgage) to a maximum of 80% to 85% of the value of your home.