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CBS News
03-06-2025
- Business
- CBS News
Where are HELOC rates heading in the second half of 2025?
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Home equity rates could shift later this year, experts say, but it may not be when you'd expect it to happen. Getty Images The average home equity amount currently stands at $313,000, according to the March 2025 Intercontinental Exchange (ICE) Mortgage Monitor report. Homeowners who want flexible access to financing can turn to a home equity line of credit (HELOC), which leverages their existing home equity and turns it into a line of credit that can be drawn from as an affordable financing option. For more than a year, HELOC interest rates have been steadily decreasing, even reaching a two-year low at one point. However, HELOC interest rates saw a slight uptick recently and then a subsequent fall, with average HELOC rates currently sitting at 8.14%. These small swings can affect HELOC rates and, in turn, how much borrowers pay to access this type of financing. Plus, HELOC rates are variable, which means they can fluctuate even after you take one out. Because of this, current and prospective borrowers should keep tabs on where HELOC rates are going. So, as we head into June, where are HELOC rates heading in the second half of 2025? We spoke with home lending professionals to share their expertise about the current HELOC environment and what to know about where rates are going. Find out how affordable a HELOC could be for you today. Where are HELOC rates heading in the second half of 2025? The Federal Reserve has worked tirelessly to tame stubborn inflation over the last few years. That's led to the high-rate environment we're in today, which has increased the cost of borrowing across a range of products, including HELOCs. "HELOC rates move in tandem with fed funds rates. So every time the Federal Reserve cuts rates…every time they make a change, then HELOC rates will move accordingly," says Shmuel Shayowitz, president and chief lending officer at Approved Funding, a licensed mortgage bank. The Federal Open Market Committee (FOMC) meets on June 17 and 18 to discuss monetary policy. At that time, the FOMC decides whether to keep rates the same or increase or decrease them. What happens at the June FOMC meeting will have a direct impact on HELOC rates, but a Fed rate cut may not be on the horizon. "It is highly unlikely that they will cut or increase rates in June," says Karen Mayfield, national head of originations at Multiply Mortgage, a mortgage-as-a-benefit provider. The CME FedWatch tool shows close to a 95% probability that there will be no change to the federal funds rate. The other 5% shows the probability of a decrease. This may be unwelcome news, as the Fed hasn't made any changes to the federal funds rate in 2025 yet. After the May meeting, the Federal Reserve attributed its decision to persistent economic uncertainty and above-average inflation. As a result, HELOC rates likely won't see a drop in June as the Federal Reserve is projected to keep the federal funds rate the same. Whether the Federal Reserve still intends to go through with the rate cuts later in 2025, though, depends on many factors. "A lot of the different economic data really comes down to impacting inflation. And that's one of the key drivers that the Fed looks at when considering whether to increase or decrease or keep it [federal funds rate] unchanged," says Mayfield. While the Federal Reserve focuses on U.S. monetary policy, there can be a ripple effect on the global stage. "The world economy is so much more dependent upon one another compared to a hundred years ago," adds Mayfield. The Federal Reserve is cautious right now, taking a wait-and-see approach and looking at information as it unfolds. "I think we'll see one to two cuts this year…and that they would be the second half of this year," says Mayfield. "So in 2025, there has yet to be a rate cut. Interestingly to note, that the rate cuts in 2024 were in September, November, and December, so the Federal Reserve is not averse to doing these changes at the end of the year, as we saw last year," Shayowitz says. If and when the Federal Reserve cuts rates later this year, though, HELOC rates will likely follow. "If somebody took out a home equity line of credit today, and there was a 50 basis point cut in September, starting October 1st, they would get the benefit of the lower interest rate and their payments and their bill would be adjusted accordingly," says Shayowitz. Learn more about your top HELOC options online now. The bottom line A home equity line of credit gives homeowners alternative financing options to a credit card or a personal loan. Though rates on most loan products are relatively high at the moment, HELOCs still provide lower rates in comparison. Instead of close to 22% on a credit card or 12% on a personal loan, homeowners who meet the eligibility requirements may score HELOC rates around 8%. So if you have other high-interest debt to consolidate or have necessary home repairs, HELOCs can provide substantial benefits on top of flexibility right now. To find the most competitive rate, look at offers from various home equity lenders. Before doing so, be aware of HELOC risks. You can get a lower interest rate, but if you fall behind on your HELOC payments, it could eventually lead to foreclosure. The variable rate on HELOCs also means that while your payments can go down, they can also go up. You can consider a home equity loan as an alternative, which gives borrowers lump sum funding and fixed interest rates. As home equity loan interest rates are fixed, it can be easier to budget for than a HELOC. Whether you go with a HELOC or home equity loan, do your research, compare offers, and know the home equity risks with either option. Most importantly, have a plan for repayment so it can be a tool to help your finances instead of dragging them down.
CBS News
30-04-2025
- Business
- CBS News
Does today's rate environment make HELOCs too risky? Here's what experts say.
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Homeowners should carefully calculate the trajectory of HELOC interest rates before borrowing equity right now. Getty Images Inflation and elevated interest rates continue to squeeze household budgets in 2025. Despite these financial hurdles, many homeowners are sitting on a valuable resource — the equity they've built in their homes. Getting a home equity line of credit (HELOC) has become a popular way to tap into this wealth. It offers lower interest rates than credit cards while providing flexibility similar to the use of a credit card. And that rate is variable and subject to change monthly for borrowers, meaning it could become even cheaper if interest rates continue to decline as they have. But the same features that make HELOCs attractive can also create financial risks. Are they too risky right now? We asked three home equity experts to share their insights on when HELOCs make sense, when they don't and what alternatives could be better right now. See how low your HELOC rate offers are here now. Does today's rate environment make HELOCs too risky? "With the prime rate at 7.5% and home prices having appreciated nationwide, I don't think HELOCs are too risky today," says Karen Mayfield, national head of originations at Multiply Mortgage, a mortgage-as-a-benefit provider. Debbie Calixto, sales manager at mortgage lender loanDepot, echoes a similar sentiment. "Households are feeling the pressure of rising living expenses," she observes. HELOCs offer a valuable alternative to high-interest credit card debt. However, Steven Glick, director of mortgage sales at real estate investment fintech company HomeAbroad, offers a more nuanced view. "HELOCs aren't inherently too risky, but they come with risks that depend on [your] situation," he explains. While home equity loan interest rates have dipped below 9%, he cautions that variable HELOC rates can climb if economic conditions change. When HELOCs make financial sense now Glick says a HELOC makes the most sense if you find yourself in one or more of these situations now: Get started with a HELOC online today. When HELOCs may not make financial sense now Here are situations where a HELOC could cause more harm than good if secured now, experts say: You have unstable income: "If your job's shaky or your DTI is above 43%, a variable-rate HELOC could stretch you thin, especially if rates rise," cautions Glick. "If your job's shaky or your DTI is above 43%, a variable-rate HELOC could stretch you thin, especially if rates rise," cautions Glick. You lack a clear purpose: "If you're borrowing for vague reasons or lifestyle expenses [such as] vacations, you're setting yourself up for trouble," warns Glick. "If you're borrowing for vague reasons or lifestyle expenses [such as] vacations, you're setting yourself up for trouble," warns Glick. The housing market is declining: If local home prices are dropping, overborrowing could leave you underwater if you need to sell. If local home prices are dropping, overborrowing could leave you underwater if you need to sell. You're on a tight budget: A HELOC's variable rate is risky if you're on a fixed budget where a $200 monthly payment increase would hurt you, according to Glick. A HELOC's variable rate is risky if you're on a fixed budget where a $200 monthly payment increase would hurt you, according to Glick. You already owe a lot: "If [you owe] a substantial amount on [your] home, it can be risky maxing out [your] entire, or a bulk, of [your] home equity," Mayfield says. Alternative home equity borrowing options to consider If a HELOC doesn't work for your circumstances right now, experts recommend these alternatives: Home equity loans Cash-out refinance loans : This replaces your existing mortgage with a larger one. Calixto notes that "even if the new mortgage is a bit higher than your current one, your borrowing costs might still be lower when everything's combined." This replaces your existing mortgage with a larger one. Calixto notes that "even if the new mortgage is a bit higher than your current one, your borrowing costs might still be lower when everything's combined." Reverse mortgages : "For homeowners 62 [of age and up], this lets you borrow against equity without monthly payments (repaid when you sell or pass away)," explains Glick. Seniors with limited income may choose this option. The bottom line HELOCs offer flexible access to your home's equity. But they work well when you have a clear purpose, stable finances and a plan for managing variable payments. Calixto advises taking a conservative approach. "Borrow only what you truly need and think carefully about how your home's value might change over time," she says. With careful planning, a HELOC can be a powerful financial tool rather than a risky burden.
CBS News
14-04-2025
- Business
- CBS News
4 HELOC moves experts say to make with rates low
Inflation cooled in March, dropping 0.4 percentage points to 2.4%, according to data from the Bureau of Labor Statistics . This new data shows that inflation is inching closer to the Federal Reserve's target of 2%. The Federal Reserve maintained the federal funds rate in March as part of its efforts to rein in inflation. The drop could be an encouraging sign that more rate cuts are in the future as planned. Based on these economic factors, home equity line of credit (HELOC) interest rates dipped below 8% to 7.90% at the start of April . However, after a tumultuous week of stock market volatility deepened economic uncertainty, average HELOC rates increased slightly to 8.0%, according to Bankrate . Despite a slight uptick, HELOC rates remain at a two-year low. These lower rates can make HELOCs an attractive alternative to other borrowing options. We spoke to some home lending experts about the right moves to make with HELOC rates around 8% now. Start by seeing what HELOC rate you could qualify for here . Considering a HELOC now? Here are four moves the experts we spoke to recommend making: Home equity line of credit borrowing differs from traditional home equity loans or other types of loans. Borrowers won't receive a lump sum of money. Instead, they'll be approved for a specific line of credit and they can draw from that amount. You might get approved for a $50,000 HELOC, but only use $12,000. As a borrower, you only pay interest on that $12,000. While you pay it back, the available credit increases and you can use it again during the draw period . In these uncertain times, a HELOC provides major flexibility. "I actually believe that everyone who has home equity should have a HELOC. I don't think that everyone should necessarily use it, but everybody should have the capacity to be able to borrow at the lower interest rate if needed," says Karen Mayfield, national head of originations for Multiply Mortgage, a mortgage broker. The cost of maintaining a HELOC won't be costly, either. "All it's costing is the annual fee, which is generally $50 to $100, typically a little lower than a credit card annual fee," adds Mayfield. A HELOC offers more favorable terms and options than borrowing from other places, such as high-interest credit cards or dipping into other reserves. "Think about what's happened in the last couple of weeks. If somebody had an unanticipated medical expense or they lost their job and the bulk of their reserves were in investments, having to sell stock right now I think would be pretty painful," says Mayfield. Though the stock market provided some relief with a subsequent upswing, the only thing certain right now is that uncertainty prevails. Having a Plan B in place and affordable borrowing tools could help if there's a serious economic downturn. Get started with a HELOC online today . Data from the Federal Reserve Bank of New York shows that Americans are relying more on credit cards. Based on their Q4 data, outstanding credit card balances hit a whopping $1.21 trillion, which is a 4% increase from the year before. Average credit card interest rates have also seen a notable increase at over 20%. If you're a homeowner buried in credit card debt, a HELOC could be a smart financial tool to consolidate debt . As HELOC interest rates hover around 8%, you could slash your interest rate and save money over the life of the loan. If you're not in debt but need financing for an upcoming purchase, a HELOC could be a more cost-effective alternative than credit cards or personal loans. "HELOCs have lower rates because they're secured to a property. So they're less risky when they're secured equity on an asset that you own and so it can be a better way to borrow money for different reasons," says Jordan Heatherly, a home loan specialist at Churchill Mortgage. If you've been delaying necessary or cosmetic renovations to your home, now could be a good time to use a HELOC with more affordable rates. Due to the unique structure of a HELOC, you can do parts of your home piece by piece — at your own pace. "We see this a lot with people who renovate their homes. Say that they get a home equity line of credit and renovate a bathroom or kitchen and then they pay that off. If they want to move on to another room in the house or do another piece of renovation, replace the roof, air conditioning, then they have access to those funds again, ongoing versus a normal loan," says Heatherly. Current HELOC borrowers can take advantage of lower average interest rates and pay down their balance. While you may only need to pay interest during your draw period, paying more can make financial sense. It's important to check the terms of your agreement first. "There could be prepayment penalties depending on the lender. But a lot of times, we see that you can pay those off as quickly as you'd like," says Heatherly. HELOC borrowers could benefit from paying down the balance in a couple of ways. "It's an opportunity for them to make more payments towards the principal and pay less in interest per month. So it's a great time to do that…At that point, they can just keep the line open and have more capital available," says Heatherly. HELOC interest rates are variable , which differs from home equity loan interest rates, which are fixed. As such, they can change at any time. Before the most recent increase, HELOC rates were trending downward. While the exact future of rates is always a guessing game, we know that HELOC rates are still more affordable than in years past. Shmuel Shayowitz, president and chief lending officer at Approved Funding, a licensed mortgage bank, notes that opening a home equity line of credit has become more accessible in recent years due to technology. "But those come with a premium for their ease of use and for their quickness. And you're paying a much higher rate to access the convenience," says Shayowitz. It's also important for borrowers to look at multiple home lenders and home equity borrowing options before committing to anything. "There are so many banks and options and sources out there that provide home equity loans and lines at very reasonable rates and they shouldn't settle for anything until they really do their research," says Shayowitz.
