Plunging HELOC rates reach lowest point since May, with home equity loans remaining stable.
Home Equity Rates in 2025: A Comprehensive Overview
Home equity rates are currently influenced by several key factors, according to the Bankrate.com national survey. This survey, which has been conducted weekly for over three decades, gathers rates and yields on banking deposits, loans, and mortgages.
The Federal Reserve's policy and interest rate actions play a significant role in shaping today's home equity lending rates, particularly for variable-rate products like Home Equity Lines of Credit (HELOCs). The Fed's decisions to hold or cut rates directly impact the cost of borrowing on home equity products.
Lender competition for customers is another factor that affects pricing, tending to drive rates lower as lenders vie for business in a steady demand environment. The current mortgage rate environment, which remains relatively high and stable, also influences home equity rates. This high and stable environment discourages refinancing and increases reliance on home equity products as alternative borrowing methods.
Strong home values and increased homeowner equity, resulting from years of home price appreciation, give homeowners more equity to tap and maintain lender confidence in second-lien home equity loans and HELOCs. Different product characteristics, such as fixed rates for home equity loans and variable rates for HELOCs, also contribute to the current market landscape.
As of August 2025, average home equity loan rates hover around 7.9% to 8.3%, with some offers as low as 6.99% depending on the lender and borrower profile. Average HELOC rates have declined gradually to around 8.27%, down from closer to 9% earlier in the year. Rates have been falling from highs seen in early 2024 but remain influenced by overall monetary policy and lender dynamics.
Sarah Rose, senior home equity manager at Affinity Federal Credit Union, suggests that now is a good time to tap into home equity with a HELOC or home equity loan. Greg McBride, Bankrate Chief Financial Analyst, predicts that home equity rates will decline in 2025, with HELOCs averaging 7.25% and home equity loans coming in at 7.90%.
Real estate is Americans' second-most popular long-term investment, according to Bankrate's 2025 Long-Term Investment Survey. Home equity products, which use your home as collateral and tend to be much less expensive compared to the interest charged on credit cards or personal loans, are still relatively high-cost debt, with the average rate over 8 percent and many lenders charging double-digit interest rates.
In Q2 2025, debt consolidation represented 39% of home equity loan volume, while home renovations accounted for 46% of loan volume. HELOC rates have rebounded somewhat from the lows they hit earlier this year, but they remain higher than the average rate for credit cards (20.13%) and personal loans (12.58%). The survey obtains rate information from the 10 largest banks and thrifts in 10 large U.S. markets, providing an accurate national apples-to-apples comparison.
In conclusion, the Federal Reserve's actions on interest rates, combined with lender competition and a stable but elevated mortgage rate environment, are the major drivers shaping today's home equity lending rates for both HELOCs and home equity loans. Strong home equity levels in the current housing market further support this borrowing trend.
In the context of Home Equity Rates in 2025, personal finance and banking-and-insurance sectors are significantly intertwined, as both the Federal Reserve's interest rate policy and competition among lenders in the banking-and-insurance industry play crucial roles in shaping home equity lending rates, particularly for products like Home Equity Lines of Credit (HELOCs) and home equity loans. Furthermore, the finance industry provides various home equity products that are considered less expensive compared to other forms of debt, such as credit cards or personal loans, making them popular choices in the personal-finance landscape.
