HELOC interest rates hit lowest since 2022

Image: Getty Images; Diagram: Bank Rate

HELOC interest rates have dropped significantly over the past week. The $30,000 home equity line fell 13 basis points to 7.04%, the lowest level since 2022, according to Bankrate’s national lender survey. In contrast, a five-year $30,000 home equity loan remained unchanged at 7.85%.

HELOCs and home equity loans are both the most affordable they’ve been in years, making them more competitive borrowing options.

“Homeowners have tremendous equity in their properties,” says Michael Pearson, senior vice president of business development at A&D Mortgage. “Many of those properties have been sitting idle for years. Families have plans for upgrades, major improvements, expanding or downsizing the property. There are a lot of people waiting for something to change so they can take action.”

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. At its most recent policy meeting in March, the Fed kept interest rates on hold again as it continues to monitor inflation and the job market.

“If the Fed maintains the status quo, mortgage rates should remain about the same,” said Ted Rothman, senior industry analyst at Bankrate. “Borrowers will no doubt welcome lower interest rates, as they are currently hovering near three-year lows, but current levels are not much worse than they have been recently, and this situation could continue for the rest of the year.”

Inflation and geopolitical tensions are also expected to affect interest rates. Rothman predicted earlier this year that the Fed would cut interest rates by three quarter-points in 2026. But with stubborn inflation and the ongoing war in Iran, Rothman no longer believes the Fed will cut rates as aggressively. “In other words, interest rates probably won’t move much for some time,” he said.

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.