Home equity lines of credit (HELOCs) and home equity loans are not impacted by the bond market volatility that affects mortgage rates. Instead, these rates are driven by the prime interest rate, which is currently at its lowest level since late 2022.
According to data analytics company Curinos, the national average monthly HELOC rate is 7.25%, while the average rate on a home equity loan is 7.56%. These rates are based on applicants with a minimum credit score of 780 and a maximum combined loan-to-value ratio (CLTV) of 70%.
The Federal Reserve estimates that homeowners have a total of $34 trillion in home equity as of the third quarter of 2025, just below a record high. With mortgage rates hovering around 6%, homeowners are less likely to consider selling their homes or opting for a cash-out refinance. In such cases, accessing the value locked into their homes through a second mortgage can be a viable alternative.
Home equity interest rates differ from primary mortgage rates as they are based on an index rate plus a margin. Typically, the prime rate serves as the index, which currently stands at 6.75% following Federal Reserve rate cuts. Lenders have the flexibility to set margins on second mortgage products like HELOCs or home equity loans, making it essential to shop around for the best rates based on your credit score, debt levels, and credit line compared to the home’s value.
While average national HELOC rates may include introductory rates that last for a limited period, home equity loans typically have fixed rates without teaser rates. It’s crucial to be aware of these nuances when considering different lenders.
The best HELOC lenders offer low fees, fixed-rate options, and generous credit lines, allowing homeowners to utilize their equity as needed. Some lenders, like FourLeaf Credit Union, may offer introductory rates on HELOCs, which later convert to variable rates. Conversely, home equity loan lenders provide lump-sum payments with fixed rates lasting the repayment period.
When comparing rates from different lenders, it’s essential to consider fees, repayment terms, and the overall cost of borrowing. The current national average for a HELOC is 7.25%, while a home equity loan averages 7.56%, serving as a baseline for rate comparisons.
Ultimately, opting for a HELOC or home equity loan can be a smart financial move, allowing homeowners to tap into their equity for various purposes like home improvements or repairs. However, it’s crucial to understand the repayment terms and potential fluctuations in interest rates, especially with HELOCs being variable in nature.
In conclusion, exploring options for a HELOC or home equity loan can provide homeowners with the flexibility to leverage their equity for financial needs while maintaining their existing primary mortgage rate. By comparing rates and terms from different lenders, homeowners can find the best option that suits their financial goals and circumstances.
