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Home equity borrowers who thought interest rates on home equity lines of credit (HELOCs) had stabilized received welcome news this week when rates on the product fell yet again, this time to a new two-year low. Now at just 8.03% on average, according to Bankrate, HELOC rates have fallen considerably over the past year or so. Over the last six months, approximately, they’ve fallen by around two percentage points, making HELOCs one of the optimal ways to borrow money right now. And considering that rates have already hit both 18-month and two-year lows so far this year, it’s not inconceivable that the downward trend will continue in the weeks and months to come.
Still, HELOC borrowing which uses your home as collateral, should always be approached strategically. That extends to knowing some critical considerations right now. Below, we’ll break down what to know before getting started.
Begin by seeing how low of a HELOC interest rate you’d qualify for here.
What to know as HELOC rates continue to fall
Here are three things to keep in mind as HELOC interest rates continue to decline:
Rates could fall even further
It’s unlikely that today’s new low HELOC rate will remain unchanged for long. HELOC rates steadily declined for much of 2024 and have hit multiple new lows, almost weekly, so far in 2025. That trend could very easily continue into April and beyond, especially considering that the inflation rate just fell.
If that continues to decline, additional Fed rate cuts become more realistic, which will then cause rates on borrowing products like HELOCs to drop again. It may not happen when a formal Fed rate cut is issued, either, as many lenders tend to reduce their rates before a rate cut is formalized. So, you may be paying less for a HELOC sooner than anticipated. Understanding this dynamic, for many homeowners, now may be the time to start shopping around.
Compare your current HELOC rates and options online today.
Risk will need to be carefully managed
A steadily declining interest rate shouldn’t cause borrowers to lose sight of how a HELOC functions. Remember that HELOC rates are variable and likely to adjust over time based on market conditions. While this is a major benefit now as rates cool, it could just as easily become problematic if the rate climate heats up again. So inherent risks will need to be managed if using a HELOC. This means calculating future repayment costs against a series of realistic interest rate scenarios (rates change monthly for borrowers) to determine affordability over both the short- and long-term.
The cost savings will be significant
If you can effectively manage the risks associated with a HELOC, however, the cost savings both immediately and over the full draw and repayment period will be significant. That’s because HELOCs are currently one of the cheapest ways to borrow money right now. HELOC interest rates for qualified borrowers are lower than home equity loans (averaging 8.37%), personal loans (averaging 12.37%) and credit cards (averaging over 20%). And, unlike the latter two options, HELOC users can potentially qualify to deduct the interest paid on the line of credit if they use it for eligible home repairs and projects, making concerns over the rate even less of a concern.
The bottom line
With HELOC interest rates hitting another low point this week, homeowners may be seriously considering using the product to borrow money now. By being aware of the potential for rates on HELOCs to fall further, being prepared to manage risks should they change course and understanding the cost savings compared to alternative options, prospective HELOC users will better be able to make repayments and use their HELOC in a cost-effective and financially enduring manner.
Learn more about borrowing with a HELOC online today.
