HELOCs soar above 8% to start year; home equity loans drop modestly

Core Insights - Home equity line of credit (HELOC) rates have increased significantly, with the average rate rising by 59 basis points to 8.22% as a major lender ended promotions [1] - The benchmark five-year home equity loan rate has slightly decreased to 7.97% [1] Rate Trends - Current HELOC rate is 8.22%, compared to 7.81% four weeks ago and 8.27% one year ago, with a 52-week average of 8.07% and a low of 7.63% [3] - The five-year home equity loan rate is currently at 7.97%, down from 7.99% four weeks ago and 8.43% one year ago, with a 52-week average of 8.24% and a low of 7.97% [3] - Other home equity loan rates include 10-year at 8.16% and 15-year at 8.10% [3] Influencing Factors - Home equity rates are primarily influenced by Federal Reserve policy and long-term inflation expectations [4] - The Fed's rate cuts in 2025 have led to the lowest HELOC and home equity loan rates in two years, with potential for further reductions in 2026 if projected cuts occur [4] - The Fed's current focus on labor market conditions rather than inflation may increase home equity borrowing appetite, potentially applying downward pressure on rates [5] Comparative Rates - HELOCs and home equity loans are generally less expensive than unsecured credit options, with HELOCs at 8.22% and home equity loans at 7.97%, compared to credit cards at 19.65% and personal loans at 12.20% [6] - Individual offers for HELOCs or home equity loans depend on factors such as creditworthiness, financials, home value, and ownership stake [6]