Home equity loan rates extend two-year low, HELOCs hold steady

Minimal movement in home equity rates in the latest week. The benchmark 5-year $30,000 home equity loan edged down two basis points to 8.13 percent, marking the second week at its lowest level in two years. Meanwhile, the $30,000 home equity line of credit was unchanged, holding at 7.84 percent, according to Bankrate’s national survey of lenders.

For homeowners wondering whether now is the right time to tap their equity, Michelle Parkison, senior vice president of capital markets at AD Mortgage, a wholesale lender based in Florida, offers this advice: “Don’t put your life on hold because you want to play the market and think rates are going to do XYZ,” she says. “You can never forecast what the market’s going to do. The house always wins. You’re never going to be able to time things perfectly.”

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 has now reached its two-week mark. The stoppage has not only delayed crucial economic data but has also created 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 80 to 85 percent 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.

• 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.