Where are HELOC rates heading in the second half of 2025?

CBS News

2 days ago

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Home equity rates could shift later this year, experts say, but it may not be when you'd expect it to happen.
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The average home equity amount currently stands at $313,000, according to the March 2025 Intercontinental Exchange (ICE) Mortgage Monitor report. Homeowners who want flexible access to financing can turn to a home equity line of credit (HELOC), which leverages their existing home equity and turns it into a line of credit that can be drawn from as an affordable financing option. For more than a year, HELOC interest rates have been steadily decreasing, even reaching a two-year low at one point. However, HELOC interest rates saw a slight uptick recently and then a subsequent fall, with average HELOC rates currently sitting at 8.14%.
These small swings can affect HELOC rates and, in turn, how much borrowers pay to access this type of financing. Plus, HELOC rates are variable, which means they can fluctuate even after you take one out. Because of this, current and prospective borrowers should keep tabs on where HELOC rates are going. So, as we head into June, where are HELOC rates heading in the second half of 2025? We spoke with home lending professionals to share their expertise about the current HELOC environment and what to know about where rates are going.
Find out how affordable a HELOC could be for you today.
Where are HELOC rates heading in the second half of 2025?
The Federal Reserve has worked tirelessly to tame stubborn inflation over the last few years. That's led to the high-rate environment we're in today, which has increased the cost of borrowing across a range of products, including HELOCs.
"HELOC rates move in tandem with fed funds rates. So every time the Federal Reserve cuts rates…every time they make a change, then HELOC rates will move accordingly," says Shmuel Shayowitz, president and chief lending officer at Approved Funding, a licensed mortgage bank.
The Federal Open Market Committee (FOMC) meets on June 17 and 18 to discuss monetary policy. At that time, the FOMC decides whether to keep rates the same or increase or decrease them.
What happens at the June FOMC meeting will have a direct impact on HELOC rates, but a Fed rate cut may not be on the horizon.
"It is highly unlikely that they will cut or increase rates in June," says Karen Mayfield, national head of originations at Multiply Mortgage, a mortgage-as-a-benefit provider.
The CME FedWatch tool shows close to a 95% probability that there will be no change to the federal funds rate. The other 5% shows the probability of a decrease. This may be unwelcome news, as the Fed hasn't made any changes to the federal funds rate in 2025 yet. After the May meeting, the Federal Reserve attributed its decision to persistent economic uncertainty and above-average inflation.
As a result, HELOC rates likely won't see a drop in June as the Federal Reserve is projected to keep the federal funds rate the same. Whether the Federal Reserve still intends to go through with the rate cuts later in 2025, though, depends on many factors.
"A lot of the different economic data really comes down to impacting inflation. And that's one of the key drivers that the Fed looks at when considering whether to increase or decrease or keep it [federal funds rate] unchanged," says Mayfield.
While the Federal Reserve focuses on U.S. monetary policy, there can be a ripple effect on the global stage.
"The world economy is so much more dependent upon one another compared to a hundred years ago," adds Mayfield.
The Federal Reserve is cautious right now, taking a wait-and-see approach and looking at information as it unfolds.
"I think we'll see one to two cuts this year…and that they would be the second half of this year," says Mayfield.
"So in 2025, there has yet to be a rate cut. Interestingly to note, that the rate cuts in 2024 were in September, November, and December, so the Federal Reserve is not averse to doing these changes at the end of the year, as we saw last year," Shayowitz says.
If and when the Federal Reserve cuts rates later this year, though, HELOC rates will likely follow.
"If somebody took out a home equity line of credit today, and there was a 50 basis point cut in September, starting October 1st, they would get the benefit of the lower interest rate and their payments and their bill would be adjusted accordingly," says Shayowitz.
Learn more about your top HELOC options online now.
The bottom line
A home equity line of credit gives homeowners alternative financing options to a credit card or a personal loan. Though rates on most loan products are relatively high at the moment, HELOCs still provide lower rates in comparison. Instead of close to 22% on a credit card or 12% on a personal loan, homeowners who meet the eligibility requirements may score HELOC rates around 8%. So if you have other high-interest debt to consolidate or have necessary home repairs, HELOCs can provide substantial benefits on top of flexibility right now.
To find the most competitive rate, look at offers from various home equity lenders. Before doing so, be aware of HELOC risks. You can get a lower interest rate, but if you fall behind on your HELOC payments, it could eventually lead to foreclosure.
The variable rate on HELOCs also means that while your payments can go down, they can also go up. You can consider a home equity loan as an alternative, which gives borrowers lump sum funding and fixed interest rates. As home equity loan interest rates are fixed, it can be easier to budget for than a HELOC. Whether you go with a HELOC or home equity loan, do your research, compare offers, and know the home equity risks with either option. Most importantly, have a plan for repayment so it can be a tool to help your finances instead of dragging them down.