Home equity prices remain at multi-year lows

No movement for home equity prices in the last week. The $30,000 home equity line and the five-year $30,000 home equity loan were unchanged, at 7.18% and 7.84%, respectively, according to Bankrate’s National Survey of Lenders.

As home equity prices remain at their lowest levels in three years, HELOCs can be a good option for homeowners who have more equity in their homes and future expenses, says Jeff Dergorian, chief investment officer and chief economist at Loan Depot.

“Maybe you got a mortgage rate of 3% or less during the pandemic and you don’t want to give it up, but you have one or more life events,” he says. “Maybe you have a lot of kids going to college, and you want to borrow money to cover it. By having a HELOC, you can draw money now and potentially draw money years down the road, provided the draw period is still open, that’s a great feature.”

Home equity prices are primarily driven by two factors – Federal Reserve policy and long-term inflation expectations. The Fed left interest rates unchanged at its January meeting, as it monitors inflation and the labor market. Looking ahead to the rest of the year, Bankruptcy senior industry analyst Ted Rossman predicts the Fed will deliver three quarter-point cuts in 2026.

“Inflation continues to moderate, albeit at a slower pace, and the labor market is stabilizing after rising unemployment,” he says. “Risks look fairly balanced right now, and the Fed will likely take some time to determine its next move. We’ll also get a new Fed chairman soon.”

Learn more: How the Federal Reserve Affects HELOCs and Home Equity Loans

Because HELOCs and home equity loans use your home as collateral, their rates are much less expensive — similar to current mortgage rates — than the interest charged on unsecured credit cards or personal loans.

While average rates are useful to know, the individual offer you receive on a particular HELOC or new home equity loan also reflects additional factors such as your creditworthiness and finances. Then there is the value of your home and the size of your property. Lenders typically limit your total home loan (including your mortgage) to 80% to 85% of your home’s value.