HELOC rates edge toward 7% as prime rate slips

The average cost of borrowing against home equity continues to decline, moving national rates closer to the 7 percent mark. As of December 22, 2025, data from analytics firm Curinos shows an average weekly rate of 7.44% for new home equity lines of credit (HELOCs). The calculation reflects applicants with a minimum credit score of 780 and a combined loan-to-value ratio capped at 70 percent.

Individual lenders are posting offers below the national mean. In several states, Bank of America lists HELOCs starting at 7.3%. FourLeaf Credit Union advertises a promotional rate of 5.99% for the first 12 months on credit lines up to $500,000, after which the loan converts to an adjustable structure.

Why rates are shifting

Second-mortgage products such as HELOCs are typically priced by adding a margin to a benchmark. The prevailing index for many lenders is the U.S. prime rate, which recently slipped to 6.75%. If a lender adds a 0.75-percentage-point margin, the initial rate would stand at 7.50 percent. Adjustments vary widely, and margins can push total costs close to 18 percent for applicants with weaker credit profiles.

Because lenders set their own margins, comparison shopping remains critical. Borrowers with higher credit scores, lower existing debt, and smaller draws relative to property value often secure more favorable terms.

Record home equity supports demand

Homeowners possess a substantial store of tappable wealth. According to the Federal Reserve’s Financial Accounts of the United States, total home equity reached almost $36 trillion at the end of the second quarter of 2025, the highest figure on record.

At the same time, average 30-year fixed mortgage rates remain slightly above 6 percent. Many owners hold primary mortgages issued at 5, 4, or even 3 percent, reducing the incentive to refinance or sell. HELOCs therefore provide a path to liquidity without disturbing low-rate first liens.

Introductory vs. long-term pricing

Some lenders promote short-term “teaser” rates that last six to 12 months before resetting. After the introductory window closes, the balance shifts to a variable structure that moves with the underlying index. Borrowers should review both stages of the offer, as payments can rise significantly over time.

For example, a $50,000 draw at 7.50 percent would cost roughly $313 per month during a typical 10-year draw period. When repayment begins, the loan often transitions to a 20-year amortization schedule, turning the arrangement into a 30-year obligation unless the balance is paid sooner. Because the rate is variable, future monthly amounts may climb if market benchmarks increase.

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How lenders set terms

Beyond credit scores and loan-to-value ratios, several factors affect pricing:

• Debt-to-income ratio: Lower existing debt enhances approval odds and may trim the margin.
• Credit line size: Smaller lines or smaller initial draws can limit risk for the lender.
• Fees: Application charges, annual fees, and early closure penalties vary widely.
• Fixed-rate options: Some institutions allow borrowers to lock a portion of the balance at a fixed rate, typically for a fee.

Strategies for potential borrowers

Analysts note that the current environment favors homeowners who intend to borrow selectively and repay quickly. Because interest accrues only on funds actually withdrawn, leaving part of the line unused can limit costs. Typical uses include renovations, repairs, or other expenses that add or preserve property value. Discretionary spending such as travel carries higher financial risk if balances linger.

Before committing, applicants are advised to:

• Compare rates and margins across multiple lenders.
• Scrutinize fee schedules, including annual or inactivity charges.
• Confirm the minimum initial draw requirement, if any.
• Model payments under both introductory and post-introductory scenarios.

Rate outlook

Market conditions suggest continued sensitivity to movements in the prime rate and wider economic indicators. Should the benchmark fall further, HELOC costs could ease, though margins may partially offset gains. Conversely, any upward shift in base rates would pass through to variable-rate borrowers, underlining the importance of repayment discipline.

With mortgage holders reluctant to relinquish historically low first-lien rates, HELOCs remain a central tool for accessing home equity. Careful evaluation of terms, timelines, and repayment capacity can help ensure the product aligns with household financial goals.

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