Richard Drury/ Getty Images; Illustration by Austin Courregé/Bankrate
Borrowing against the value of your home became cheaper in the most recent week. The $30,000 HELOC (home equity line of credit) fell 5 basis points to 8.56 percent, a new 52-week low, according to Bankrate’s national survey of lenders. Meanwhile, the average $30,000 home equity loan slid one basis point to 8.40 percent, though the longer-term (15-year) loan rose slightly.
“I expect interest rates for home equity loans and HELOCs to end the year lower than where they are now,” says Peter Idziak, attorney at San Antonio, TX-based Polunsky Beitel Green, a law firm specializing in residential mortgage lenders. While the Federal Reserve is expected to cut interest rates in December for a third time this year, “I don’t believe these cuts have been fully priced into the mortgage market,” he says.
| Current | 4 weeks ago | One year ago | 52-week average | 52-week low | |
|---|---|---|---|---|---|
| HELOC | 8.56% | 8.69% | 10.02% | 9.25% | 8.56% |
| 15-year home equity loan | 8.48% | 8.38% | 9.12% | 8.74% | 8.37% |
| 10-year home equity loan | 8.53% | 8.46% | 9.08% | 8.77% | 8.46% |
| Note: The home equity rates in this survey assume a line or loan amount of $30,000. | |||||
What’s driving home equity rates today?
After hovering around 9 percent for more than a year, HELoan and HELOC rates have been gradually moving lower in 2024 — and the pace quickened with the onset of autumn. Their moves are currently being driven by two factors: lender competition — as banks and mortgage companies try to attract applicants with low-for-a-limited-time loan terms — and the Federal Reserve’s actions. Earlier in November, the central bank cut rates for the second meeting in a row, this time by a quarter point — reflecting the moderation of inflation.
“HELOC rates will continue to come down more or less in step with Fed rate cuts,” says Greg McBride, chief financial analyst at Bankrate. “HELOC rates will be sensitive to declining interest rates and borrowers will see rates steadily moving lower, even faster than fixed-rate home equity loans. HELOC rates could fall faster than credit card rates, particularly if competition brings about introductory offers and if credit card issuers are skittish about delinquencies and slower to pass along lower rates.”
What influences home equity loan rates?
Several factors can influence rates on home equity loans and HELOCs.
Chief among them: changes to the Federal Reserve’s monetary policy. New home equity loans and HELOCs are tied to the prime rate, which tends to move alongside the benchmark interest rate that the Fed adjusts. As a result, when the Fed raises rates, borrowing costs on equity-based loans tend to go up. And the opposite happens when it lowers rates.
The Fed’s moves influence the general direction of interest rates not just for home equity loans, but also for consumer loans and financing in general. However, because they use your home as collateral, HELOCs and HELoan rates tend to be more akin to current mortgage rates — and much less expensive than the interest charged by credit cards and personal loans, which aren’t secured.
Comparing consumer loan rates
The Fed’s monetary policy influences interest rate trends overall and advertised rates you see. However, the individualized offer you receive from a lender on a particular HELOC or new HELoan reflects an additional factor: your creditworthiness — specifically your credit score, debt-to-income ratio, and the value of the home you’re putting up as collateral.
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