Home equity interest rates and HELOC interest rates hit three-year lows

Image: Getty Images; Diagram: Bank Rate

Home equity rates have been mixed in recent weeks, with both products hitting their lowest levels in three years. The benchmark five-year $30,000 home equity loan fell 6 basis points to 7.92%, according to Bankrate’s national survey of lenders. At the same time, the $30,000 home equity line remained unchanged at 7.44%, a three-year low.

Jeff Dergrahian, chief investment officer and chief economist at Loan Depot, said that once interest rates reached their lowest levels in 2023, demand for mortgage loans increased due to rising homeowner equity, rising household debt, and strong renovation activity due to the lock-in effect of high mortgage rates. “With economic indicators pushing interest rates lower, and interest rates continuing to increase in the secondary market among those who purchase, finance, and securitize these products, HELOCs and home equity loans are becoming even more attractive borrowing options for homeowners,” he said.

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 has cut interest rates three times in 2025, pushing HELOCs and home equity loans to their lowest level in two years.

Ted Rothman, senior industry analyst at Bankrate, expects housing rates to continue falling if the Fed implements the three-quarter point rate cut it currently anticipates in 2026.

Rothman said the Fed is now focusing more on labor market conditions than on inflationary pressures. He believes economic conditions will remain favorable this year, which could increase the appetite for home loans. “That could actually put some downward pressure on interest rates as well,” 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.

Average interest rates are good to know, but the individual offer you receive on your particular HELOC or new home equity loan will 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.