Upward streak for HELOCs continues as home equity loans decline

A split decision for home equity rates this week. In its fifth straight week of gains, the $30,000 home equity line of credit jumped two basis points to 7.41%, close to its highest level this year, according to Bankrate’s national survey of lenders. Meanwhile, the five-year $30,000 home equity loan fell four basis points to 8.05%.

Even with this week’s divergence, Bob Johnson, head of originations at Newrez, says homeowners who want to tap into that equity without paying off their existing mortgage are looking at HELOCs and home equity loans.

“Given where credit card rates are, a lot of folks can look to that to try and reduce their interest expenses by choosing a home equity product,” he says. “Something close to 45% or 50% of folks have got some sort of significant equity in their property. It’s just a matter of how they want to try and get it out.”

What’s driving home equity rates today?

Home equity rates are being driven primarily by two factors — Federal Reserve policy and long-term inflation expectations.

As expected, the Fed held interest rates steady at its latest policy-setting meeting in May. However, uncertainty is intensifying about its next moves. In the largest show of dissent since 1992, four Fed officials opposed the decision to keep rates unchanged.

“If not for the inflation created by the war in Iran, there’s a good chance the Fed would be cutting rates,” says Ted Rossman, principal Bankrate analyst. “They’re standing pat for now, waiting to see what happens with prices. The job market, the other side of the Fed’s dual mandate, appears relatively stable for now.” As a result, Rossman predicts that “it should be a generally flat rate environment for the balance of 2026, meaning an average around 7% for HELOCs and around 8% for home equity loans.”

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 HELOC or new home equity loan also reflects additional factors, such as 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.

Unlock your home’s value

A fixed-rate home equity loan offers a lump-sum payout and a predictable repayment schedule.

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