Renting your home has not been this cheap for years.
That’s if you want to use the Home Equity Line of Credit (HELOC). For most of 2025, the HELOC rate has sunk, currently under 8%. For homeowners who need cash for renovations, debt settlement, etc., the decline provides an opportunity to withdraw capital from the home at a minimum interest rate over two years.
But will prices continue to drop in the coming months?
What is your outlook for HELOC rates?
A sustainable drop-in Home Equity Credit (HELOC) Fees began last fall after the Federal Reserve first cut benchmark interest rates. A further reduction occurred due to the subsequent small cuts in the two subsequent meetings. And they continued to soften this year despite the fact that at the first two meetings of 2025, the Fed put the brakes on its rate cuts.
“We’re looking forward to seeing you in the future,” said Greg McBride, Bankrate’s chief financial analyst. “At the moment, the Fed is firmly planted on the bystanders, so there is no immediate catalyst to push the HELOC rate in any way, indicating whether the tone of economic data over the coming months is indicating concerns about accelerated inflation or repeated economic events.
Still, I look forward to McBride at the end of 2025 prediction Its HELOC rate averages 7.25%, the lowest level in almost three years. He emphasizes that borrowing costs are unlikely to return to the rock bottom charges they saw when they fell to 3.86% during the pandemic when soaked at less than 5% around the Great Recession.
“Beware of what you want,” says McBride. “We are not going to go back to the artificially low rates that we see right away following the Great Recession. Perhaps at some point, that point will be a very serious recession or financial crisis. Higher interest rates in a good economy are better than very low rates in a really bad economy.”
What affects the HELOC rate?
HELOC rates are primarily according to the prime rate. This will be affected by the Federal Reserve monetary policy movements. When the Fed cuts the federal funding rates on its benchmarks, the HELOC rates usually drop, and when the Fed increases the rates, the opposite usually occurs – they increase.
Of course, the Fed does not operate in a vacuum. In shaping policies, it weighs the effects of both the US economy and the domestic and geopolitical events. As Mark Hamrick, a senior economic analyst at Bankrate, points out, “The Fed is waiting to see the Trump administration’s policy action, how tariffs that are most effective in generations, affect the economy. It is inconsistent with policies and processes from the White House that come with comments from other governments and is incompetent.”
Hamrick notes that the Fed also notes the benefits to inflation and the risks of growth and job market drawbacks. “Both these dynamics pose a threat to achieving the dual duties of stable prices (fighting inflation) and maximum employment (a healthy job market). Some analysts and investors are betting their first move, which will be cut in the coming months, but that’s not certain.
Is this a good time to get Helock?
Is it time to jump on Heloc Bandwagon at the lowest level of Heloc rates in over a year?
It’s important to keep things in context despite the drop in rates. Even under 8%, the Home Equity Credit Line (HELOC) is not a low-cost source of funding at all.
“Homeowners are sitting in record amounts of home equity, but borrowing rates are still high,” says McBride. “Many HELOCs take on a 9% or 10% fee. That’s not convincing because there’s no chance that interest rates will be significantly reduced anytime soon.”
But even so, homeowners flock to Helock. In the fourth quarter of 2024, HELOCS accounted for more than 16% of all loans, earning nearly quadruple amounts in 2021, according to Property Analyst Attom Data Solutions. Consumers also increased their HELOCS balance from $9 billion to $396 billion for the fourth quarter of 2024. Federal Reserve Bank of New York.
Experts say HELOC is worth considering. Especially if you have built up important ownership in your home, as many US homeowners have done. At the end of 2024, the average mortgage-holding homeowners had $303,000, over $4,000 a year, according to real estate data analyst Cotality.
“Because of the historic rise in home prices, HELOCS is an easy way to use that home equity,” says Brian Grzebin, president of mortgage banking at Univest Bank and Trust. “Most HELOCs are tied to a declining prime rate with the Fed cut, making it a good time for people who want to pay off high credit card debt, renovate their homes, or make large purchases that otherwise have a higher rate.”
If you want to play, McBride offers additional tips. Find promotional rate offers from Helock lenders and offer lower than the market profits at fixed rates for up to one year. “Shopping and consider a 6% adoption offer,” he advises. This will allow you to “purchase at a lower rate for a certain period of time to reduce balance before a higher rate begins (HELOC).”
