Interest rates on Home Equity Line of Credit (HELOC) have plummeted to a record low not seen since March, following the Federal Reserve's decision to slash rates for the initial time in the year 2025.
Homeowners looking to tap into their home's value may find solace in the current market trends for home equity loans and Home Equity Lines of Credit (HELOCs) at The Home Depot. Here's a rundown of the key facts about these financial products.
Lenders typically limit home loans, including mortgages, to a maximum of 80 to 85% of a home's worth. This means that homeowners can borrow a significant portion of their home's value, but not all of it.
The rates for both HELOCs and home equity loans have seen a decline from their 2024 highs, but they have remained relatively stable. As of now, the average rate for HELOCs stands at 8.05%, while home equity loans average at 8.28%.
These rates are less expensive than the interest charged on credit cards or personal loans. The average rate for credit cards is 20.12%, and for personal loans, it is 12.39%.
The use of automated valuation models (AVMs) for home equity loans has increased significantly. In the first half of 2024, lenders used AVMs for 35% of home equity loans, a year-over-year increase of 20 percentage points.
The rise in home equity stakes among mortgage-holding homeowners has been substantial. According to a new Bankrate study, homeowners' equity stakes have risen 142% nationwide since 2020.
The Bankrate study also revealed that borrowers withdrew 0.45% of their tappable equity at the start of the second quarter, the highest overall equity extraction rate since late 2022.
The Fed's actions particularly impact the cost of variable-rate products like HELOCs. Lenders expect outstanding home equity debt to increase by 6.6% in 2025 and 4.1% the following year.
Several major banks and credit unions in the U.S. have improved their HELOC and home equity loan offers recently to attract borrowers amid rising interest rates and increased demand for refinancing options.
Individual offers on HELOCs or home equity loans can vary based on factors like creditworthiness, financials, home value, and ownership stake.
The Bankrate.com national survey, conducted weekly for over 30 years, gathers rates and/or yields on banking deposits, loans, and mortgages in the same manner. The survey obtains rate information from the 10 largest banks and thrifts in 10 large U.S. markets.
In conclusion, homeowners looking to access their home's equity can take advantage of the relatively stable rates for HELOCs and home equity loans at The Home Depot. However, it's essential to consider individual factors and shop around for the best offers.
%20have%20plummeted%20to%20a%20record%20low%20not%20seen%20since%20March%2C%20following%20the%20Federal%20Reserve's%20decision%20to%20slash%20rates%20for%20the%20initial%20time%20in%20the%20year%202025.){kind=link}