HELOC interest rates are at their lowest level in more than three years

Image: Getty Images; Diagram: Bank Rate

Home equity rates have become more affordable in recent weeks. The $30,000 home equity line fell 14 basis points to 7.18%, the lowest level in three years, according to Bankrate’s national lender survey. Meanwhile, five-year, $30,000 home equity loans fell 3 basis points to 7.84%.

“If a consumer is looking for credit or some type of debt financing, HELOCs and home equity loans tend to be one of the lowest interest rate products,” said Seitan Merchant, TransUnion’s senior vice president of auto and home loans. “There are probably a lot of consumers who would benefit from consolidating their loans and getting lower interest rates. This bodes well for mortgage lenders.”

What is driving home interest rates up today?

Home equity rates are determined primarily by two factors: Federal Reserve policy and long-term inflation expectations. The Fed kept interest rates on hold at its January meeting as it continued to monitor inflation and the job market. Looking ahead to the rest of this year, Bankrate senior industry analyst Ted Rothman expects the Fed to cut rates by three quarter points in 2026.

“Inflation continues to ease, albeit slowly, and the job market appears to be stabilizing after rising unemployment,” he said. “Right now, the risks appear to be fairly balanced, and it will likely take some time for the Fed to decide on its next action. A new Fed chair will also be installed soon.”

Comparison of current home equity interest rates and interest rates on other types of credit

Because HELOCs and home equity loans use your home as collateral, their interest rates tend to be much cheaper than the interest rates charged on unsecured credit cards or personal loans, and are closer to current mortgage rates.

While knowing the average interest rate is helpful, the individual offer you receive on a particular HELOC or new home equity loan will also reflect additional factors, such as your creditworthiness and financial situation. Then there is the value of the home and the size of the ownership. Lenders typically limit all home loans (including mortgages) to a maximum of 80% to 85% of the home’s value.

Remember: Even if you can secure a favorable interest rate from a lender, home equity products are still relatively high-cost debt.