The national average rate for second mortgage products, such as home equity loans and lines of credit, remains at multi-year lows. The prime rate, which serves as a benchmark for home equity lending, is expected to stay steady as the Federal Reserve considers its next move regarding interest rates.
According to Curinos data, the average rate for a Home Equity Line of Credit (HELOC) is currently at 7.25%, representing a 19 basis point decrease from the previous month. On the other hand, the national average rate for a home equity loan stands at 7.56%, which is three basis points lower than it was a month ago. These rates are based on applicants with a minimum credit score of 780 and a maximum combined loan-to-value ratio (CLTV) of less than 70%.
The Federal Reserve reported that homeowners have nearly $34 trillion in equity tied up in their homes as of the end of the third quarter of 2025. With mortgage rates remaining low, homeowners are reluctant to part ways with their primary mortgages. This reluctance makes selling a house or opting for a cash-out refinance less appealing options. Instead, accessing this equity through a HELOC or a lump-sum home equity loan can be a more attractive alternative.
Home equity interest rates differ from mortgage rates in that they are calculated based on an index rate plus a margin. Typically, the prime rate serves as the index, which currently stands at 6.75% following the last Federal Reserve rate cut. Lenders have the flexibility to adjust the margin based on factors such as the borrower’s credit score, existing debt, and the credit line amount compared to the home’s value.
With three rate cuts from the Federal Reserve in 2025, the prime rate has decreased to 6.75%, prompting home equity lenders to reprice their products. For instance, FourLeaf Credit Union is offering a HELOC APR of 5.99% for the first 12 months on credit lines up to $500,000. This introductory rate will convert to a variable rate after the initial period.
When comparing lenders, it’s essential to consider both the rates offered as well as additional factors like fees, repayment terms, and minimum draw amounts. Fixed-rate home equity loans may be more straightforward to navigate since the interest rate remains constant throughout the repayment period, eliminating the need to worry about draw minimums.
Interest rates have been on a downward trend throughout most of 2025 and are expected to continue dropping. This makes it a favorable time to consider a second mortgage, whether through a HELOC or a home equity loan, to fund home improvements, repairs, or other expenses. However, borrowers should be mindful of the variable nature of HELOC rates, which can impact monthly payments over time.
In conclusion, the current market conditions make it an opportune time to explore second mortgage options for accessing the equity tied up in your home. Whether opting for a HELOC or a home equity loan, careful consideration of rates, terms, and repayment plans is crucial to making an informed decision that aligns with your financial goals.
