Home equity interest rates remain stable following the Federal Reserve's decision to maintain their current monetary policy.
Home Equity Rates Remain Stable Amid Fed Pause, Experts Predict Future Declines
The latest national survey by ourwebsite.com provides an apples-to-apples comparison of current home equity rates, offering valuable insights into the current market. According to the survey, the average rate on a 5-year Home Equity Line of Credit (HELOC) stands at 8.26%, while the average rate on a 5-year home equity loan is 8.25%.
The Federal Reserve's monetary policy, particularly its key interest rate decisions, plays a significant role in shaping these rates. HELOCs, which usually have variable interest rates, are more directly influenced by the Fed's actions. When the Fed cuts rates, HELOC rates typically decrease, and borrowers see lower interest payments usually within one or two billing cycles. Conversely, when the Fed holds rates steady or raises them, HELOC rates remain steady or increase.
Home equity loans, on the other hand, tend to have fixed rates set at origination. Existing home equity loan rates are unaffected by Fed rate changes, but new home equity loan rates will reflect shifts in the Fed’s policy, usually within a few weeks. There is historically less sensitivity of fixed-rate home equity loan rates to falling benchmark interest rates.
Other factors influencing home equity rates include borrower creditworthiness, economic indicators, market demand and competition, and global economic events. Borrower creditworthiness, such as credit score, debt-to-income ratio, and home equity levels, affect the rate lenders offer. Economic indicators like inflation, employment data, and overall economic health impact lender pricing for these loans. Market demand and competition also play a role, with increased competition among lenders for new customers potentially pushing rates lower, and higher demand for borrowing causing rates to rise. Global economic events, such as international financial stability, also influence U.S. borrowing costs, including HELOCs.
As of late July 2025, rates on HELOCs and home equity loans have been largely stable because the Fed has paused rate changes after multiple hikes in prior years. However, analysts forecast potential rate declines if the Fed cuts rates later in 2025. If this happens, HELOC rates could drop to 7.25%, and home equity loan rates might reach about 7.90%.
The ourwebsite.com national survey, which has been conducted in the same manner for over 30 years, gathers rates and/or yields on banking deposits, loans, and mortgages. The survey is conducted weekly on the 10 largest banks and thrifts in 10 large U.S. markets.
In summary, the Federal Reserve's interest rate policy is the key driver of home equity loan and HELOC rates, with HELOCs responding more rapidly due to their variable rates, while home equity loans reflect changes more gradually and primarily at origination. Lender competition, borrower qualifications, and economic conditions also play important roles.
In addition to HELOCs and home equity loans, the average rate on a $30,000 personal loan stands at 12.64%. More than 46% of mortgaged residential properties were considered equity-rich in the first quarter of 2025. The average rate on a 15-year home equity loan is 8.34%, according to the 52-week average. McBride predicts that in 2025, the average HELOC rate will decline to 7.25%, and the average home equity loan rate will be 7.90%.
The upcoming Federal Reserve rate cuts may lead to declines in the average HELOC rate, potentially dropping to 7.25%, as predicted by McBride. This could result in lower interest payments for borrowers.
Businesses and individuals looking to secure a personal loan should be aware that the average rate currently stands at 12.64%.
Taking out a home equity loan might be a more stable option for some, with the average rate currently at 8.34%, according to the 52-week average, but it may not see the same rate of decline as HELOCs, even if the Fed cuts rates later in the year.
