HELOC rates trajectory in the latter part of 2025: Predictions and analysis

HELOC rates trajectory in the latter part of 2025: Predictions and analysis

"Here's the skinny on HELOCs in the second half of 2025!"

Currently, the average home equity stands at a whopping $313,000, according to the Intercontinental Exchange (ICE) Mortgage Monitor report from March 2025. If you're a homeowner yearning for some financial flexibility, you might want to explore a home equity line of credit (HELOC). Over the past year, HELOC interest rates have been on a steady downward trend, even reaching a two-year low at one point. However, they saw a slight hike recently, but they're back down to an average of 8.14% as of now.

But, these fluctuations can impact how much you pay for HELOCs. Plus, HELOC rates are variable, meaning they can go up and down. Given this, it's crucial that current and future borrowers keep an eye on HELOC rates. So, what's the story for the second half of 2025? We tapped into the minds of home lending professionals to spill the beans about the state of HELOCs and what to expect.

The lowdown on HELOC rates in the second half of 2025:

The Federal Reserve has been battling stubborn inflation like a boss for a while now, leading to a super-high rate environment. This has, in turn, increased borrowing costs across the board, including HELOCs.

"HELOC rates move hand-in-hand with fed funds rates. So whenever the Federal Reserve makes a move, HELOC rates will follow," says Shmuel Shayowitz, president and chief lending officer at Approved Funding, a licensed mortgage bank.

The Federal Open Market Committee (FOMC) holds its meet-up on June 17-18 for a chat about monetary policy. During this meeting, the FOMC decides whether to keep things as they are or tweak interest rates. Whatever they decide will directly impact HELOC rates.

But a rate cut in June may not be on the cards.

"It's highly unlikely that they'll cut or hike rates in June," says Karen Mayfield, national head of originations at Multiply Mortgage, a mortgage-as-a-benefit provider.

The CME FedWatch tool shows that the probability of a rate change is nearly 95% for a hold, with the remaining 5% pointing to a possible drop. Even though the Fed hasn't made any changes to the federal funds rate yet in 2025, after the May meeting, they attributed their decision to lingering economic uncertainty and above-average inflation.

So, don't hold your breath for a rate drop in June, as the Federal Reserve is expected to keep the federal funds rate the same. Whether they'll still go ahead with the rate cuts later in 2025 depends on numerous factors.

"The different economic data plays a crucial role in impacting inflation, which is one of the key factors the Fed looks at when deciding whether to adjust or maintain the federal funds rate," says Mayfield.

Though the Federal Reserve focuses on U.S. monetary policy, it can have a knock-on effect on the global economy.

"The world economy has grown more dependent on one another compared to a hundred years ago," adds Mayfield.

The Federal Reserve is being extra cautious at the moment, taking a wait-and-see approach and studying the information as it emerges.

"I think we'll see one to two cuts this year, and they would occur in the second half of the year," says Mayfield.

"In 2025, there hasn't been a rate cut yet. Interestingly, the rate cuts in 2024 were in September, November, and December, so the Federal Reserve isn't shy about doing changes towards the end of the year," Shayowitz says.

If the Federal Reserve decides to cut rates later in 2025, HELOC rates will probably follow suit.

"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 enjoy the benefits of a lower interest rate, and their payments would be adjusted accordingly," says Shayowitz.

Peep the rundown on the best HELOC options online today!

In essence, HELOCs present homeowners with alternatives to credit cards or personal loans when it comes to financing options. Although rates on other loan products are generally high, HELOCs still beat them in terms of interest rates. Instead of close to 22% for credit cards or 12% for personal loans, homeowners who qualify may score HELOC rates of around 8%. If you're drowning in high-interest debt or need funding for home repairs, HELOCs could provide some much-needed relief and flexibility.

To land the most competitive rate, compare offers from various home equity lenders. Just remember to be aware of HELOC risks. You may snag a lower interest rate, but if you fall behind on payments, it could lead to foreclosure.

The variable nature of HELOC rates means that your payments can go down, but they can also go up. If you'd rather have stability, consider a home equity loan as an alternative, which provides a lump sum and fixed interest rates. Since the interest rates for home equity loans are fixed, it can make budgeting easier. Whether you go for a HELOC or home equity loan, do your homework, compare offers, and be knowledgable about the risks associated with either option. Most importantly, have a solid repayment plan to use HELOCs as a tool to boost your finances instead of dragging them down.

1. Homeowners planning for financial flexibility might want to consider a home equity line of credit (HELOC), given the downward trend in HELOC interest rates over the past year.
2. For the second half of 2025, HELOC rates are expected to increase due to rising borrowing costs across the board, including HELOCs, as a result of the Federal Reserve's efforts to combat inflation.
3. If you're considering a HELOC, it's crucial to keep an eye on HELOC rates, which are likely to follow the actions of the Federal Reserve.
4. As an alternative to HELOCs, homeowners could opt for home equity loans, which provide a lump sum and fixed interest rates, making budgeting easier compared to the variable nature of HELOC rates.

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