Seriously Underwater Mortgages Rise to 2.7% in Q2 2025
The latest figures reveal a rise in seriously underwater mortgages, reaching 2.7% in Q2 2025, up from 2.4% in the previous year. This increase is partly driven by the Federal Reserve's actions on interest rates, which also impact the cost of variable-rate products like Home Equity Lines of Credit (HELOCs).
HELOCs and home equity loans currently offer rates comparable to mortgage rates, significantly lower than those of credit cards or personal loans. Lender competition, promotional offers, and underwriting standards also play a role in determining these rates. Both HELOC and home equity loan rates have seen a substantial decline from their 2024 highs and are nearing their yearly lows.
Fixed-rate home equity loans provide a lump-sum payout and a predictable repayment schedule, offering stability to borrowers. The Federal Reserve has hinted at two more potential rate cuts this year, which could further lower HELOC rates. To secure competitive rates, borrowers are advised to shop around and consider additional perks or services offered by some banks.
The rise in underwater mortgages, coupled with the Federal Reserve's influence on HELOC rates, highlights the importance of staying informed about market trends. Borrowers should explore their options, including fixed-rate home equity loans, and compare offers to make the most of current rates and benefits.
