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Home equity loan interest rates are down a bit compared to a year ago, largely thanks to the Federal Reserve’s late-2024 rate cuts.
Case in point: A 5-year home equity loan averaged nearly 9% in January 2024. Now, it’s 8.36%. Rates on home equity lines of credit (HELOCs) have fallen even further, dropping from an average of just over 10% to the high 7% range they sit in today.
Those lower rates are great news for homeowners in need of cash — especially compared to the sky-high rates consumers are seeing on credit cards these days. But there’s no guarantee they will last. The Fed still has six meetings left for 2025, and other economic factors could push rates up or down, too.
If you’re considering taking out a home equity loan this year, it helps to know what expect for rates. Below, we gathered the insights and predications from a few experts in the space.
Start by seeing how low of a home equity loan rate you’d qualify for here.
What’s next for home equity loan rates?
Here’s what the experts we spoke to are now predicting for home equity loan rates:
Rates should hold steady in the near term
For the most part, experts project that rates on home equity products will hold steady for the time being. The big reason? The Federal Reserve isn’t in a rush to cut rates again soon.
As Fed Chairman Jerome Powell said in his most recent post-meeting press conference, “I think we’re not going to be in any hurry to move. And, as I mentioned, I think we’re well-positioned to wait for further clarity and not in any hurry.”
So if overall interest rates stay steady, it’s likely that rates on home equity loans and HELOCs will remain about the same, too — barring any major changes in the market.
“While no one can know where loan rates head next, I would anticipate for the remainder of 2025, interest rates will be steady to lower,” says Bruce Maginn, a financial advisor at Solomon Financial, a financial advisory firm.
Explore your current home equity loan rate offers here.
Rates could drop further later in the year
As Maginn mentions, there’s a chance that home equity rates could drop later in the year. The Fed is projecting two rate cuts at some point this year, and the CMEGroup’s FedWatch tool, which uses investment activity to predict future Fed moves, shows those cuts are very unlikely at the next meeting (which is set for May).
They could, however, come at later meetings — June, July, September, October, or December, depending on market conditions.
“I expect HELOC and home equity loan rates to come down in the next six to 12 months,” says Evan Luchaco, a home loan specialist at Churchill Mortgage. “Once the dust settles with tariffs, and the markets become accustomed to the new order of business, I believe we’ll begin to see the Fed move towards lowering the Fed funds rate, thereby leading HELOC and home equity loan rates to come down.”
HELOCs may be a better deal
In the meantime, if you need to tap your home equity, a HELOC may be a better choice than a home equity loan. That’s because HELOC rates are lower than home equity loan rates at the moment, which can save you on your monthly payment and on interest.
“On average, the interest rate charged by HELOCs is 40 to 50 basis points lower than home equity loans,” Maginn says.
Just be careful, as HELOCs have variable interest rates which will adjust monthly. They can also lead to more interest costs long-term if you don’t have a plan for actively paying it back from the start.
“With a HELOC, you generally only need to pay interest-only payments during the draw period, so that is generally what people do and then they go years without paying anything meaningful towards principal,” says John Bergquist, president of financial services at Elysium, an investment management firm. “Therefore, maintaining the full balance over time means they will also pay more interest over time.”
The bottom line
For now, the experts we spoke to see home equity loan rates remaining relatively steady. But a number of factors drive home equity loan rates, including Federal Reserve policy, so changes there could come as soon as June. In the interim, homeowners should also explore their HELOC options as rates there are significantly lower than home equity loans and they could fall further each month thanks to a variable rate that responds to market changes (while a home equity loan rate will remain fixed unless refinanced).
Learn more about your HELOC and home equity loan options here.
