Home Equity Rates Hold Steady Despite Fed Cut

Image: Getty Images; Illustration: Bankrate

Home equity rates held steady as the Federal Reserve lowered interest rates by a quarter point at its final meeting of 2025. The $30,000 home equity line of credit was unchanged, holding at 7.81% for the fifth straight week, according to Bankrate’s national survey of lenders. Meanwhile, the benchmark five-year $30,000 home equity loan also held at 7.99%, its lowest level in two years. 

What could the Fed’s rate cut mean for the future of home equity loans and HELOCs? “Cutting rates removes some restriction on the economy and will hopefully stimulate the economy to the extent that it prevents further weakening in the job market,” says Ted Rossman, senior analyst at Bankrate. “Right now, the job market is getting more of the Fed’s attention than inflation. We should see continued downward movement, albeit slight, in HELOC and home equity loan rates as a result.”

What’s driving home equity rates today?

Both HELOC and home equity loan rates have declined substantially from their 2024 highs. Rates are being driven primarily by two factors — Federal Reserve policy and long-term inflation expectations. Three times in 2025, the central bank lowered interest rates by a quarter point and said inflation continues to be a concern.

“Variable rates, such as those on HELOCs, will move lower alongside the federal funds rate, allowing both new and existing borrowers to benefit,” says Stephen Kates, senior analyst at Bankrate. “Fixed home equity loan rates, similar to mortgage rates, will more closely track the 10-year Treasury yield, which responds less directly to the federal funds rate and more to broader economic conditions and inflation expectations.”

Current home equity rates vs. rates on other types of credit

Because HELOCs and home equity loans use your home as collateral, their rates tend to be much less expensive — more akin to current mortgage rates — than the interest charged on credit cards or personal loans, which aren’t secured.

While average rates are useful to know, the individual offer you receive on a particular HELOC or new home equity loan reflects additional factors, like your creditworthiness and financials. Then there’s the value of your home and the size of your ownership stake. Lenders generally limit all your home loans (including your mortgage) to a maximum of 80% to 85% of your home’s worth.

Keep in mind: Even if you’re able to secure a favorable rate from a lender, home equity products are still relatively high-cost debt.

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A fixed-rate home equity loan offers a lump-sum payout and a predictable repayment schedule.

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