HELOC rates hit a two-year low: 3 reasons to open one now

Homeowners who have been thinking about tapping into their home’s equity got some welcome news this week: home equity line of credit (HELOC) rates have officially hit their lowest point in two years. The average HELOC rate is now 8.12%, marking a significant decrease from the 9.09% average seen just one year ago. This nearly one percentage point reduction also presents an opportunity for substantial savings for borrowers who want to tap into their home equity with this type of borrowing tool.

And, right now there are a lot of homeowners who may want to consider doing just that. After all, not only are rates on HELOCs sitting at a two-year low, but this unique type of home equity borrowing offers other big benefits to borrowers. For example, unlike a home equity loan, which requires you to borrow a lump sum of money upfront, a HELOC functions more like a credit card, allowing you to withdraw funds as needed. This makes it perfect for homeowners who may need a more flexible borrowing option.

But lower rates and borrowing flexibility aren’t the only benefits a HELOC offers in today’s unique economic environment. There are a few other reasons homeowners may want to consider this type of home equity borrowing, in particular, right now. Below, we’ll break down three of them.

See how much equity you could borrow with a HELOC now.

3 reasons to open a HELOC right now

Here’s a closer look at why opening a HELOC now makes sense:

HELOC rates are lower than most other borrowing options

When comparing borrowing alternatives, HELOCs stand out as one of the most cost-effective options available right now. For example, personal loan rates are currently averaging 12.37% — over 4% higher on average — and can climb even higher depending on your credit and borrower profile. The comparison becomes even more stark when looking at credit card rates, which are hovering near a wallet-draining 23%.

HELOCs currently hold an advantage over home equity loans, too. Right now, home equity loan rates are sitting at 8.40% on average, making the current HELOC average of 8.12% the more affordable choice. While this difference may seem small, even a quarter-point difference can translate to thousands in interest savings over an extended repayment period. So, these comparative rates make HELOCs the clear financial winner among readily available borrowing options. 

Find out what HELOC rates you could qualify for today.

The variable-rate nature could benefit you over time

Unlike fixed-rate home equity loans, most HELOCs come with variable interest rates that fluctuate with the wider rate environment — which can be a strategic advantage in the right economic environment. While inflation remains a concern right now, many experts anticipate that interest rates will gradually decrease in the coming years as the Federal Reserve adjusts its approach to monetary policy. If that happens, the rate on your HELOC could drop as well, making your monthly payments even more affordable.

So, for borrowers willing to accept some fluctuation in their interest rate, opting for a HELOC over another type of home equity borrowing could result in significant long-term savings, provided that market conditions shift in their favor. That said, borrowers should still be mindful that rate changes can push their HELOC rate up, too — increasing their monthly costs, so it’s important to also have a repayment strategy in place to manage any potential increases.

Homeowners have a lot of equity to borrow from

Another major advantage of a HELOC is the sheer amount of equity homeowners have built up in their homes. The average homeowner has approximately $319,000 in home equity currently, which provides a significant borrowing opportunity for those who need access to larger sums of money for major expenses such as home renovations, medical bills or education costs.

And, a HELOC allows homeowners to tap into this substantial equity while maintaining flexibility in how they use the funds. Since it functions as a revolving line of credit, borrowers can access money as needed rather than taking out a lump sum all at once. This makes HELOCs especially useful for those who may have ongoing financial needs or projects that require phased spending. 

The bottom line

With HELOC rates sitting at a two-year low, now is an opportune time for homeowners to take advantage of this cost-effective financing tool. The lower rates make HELOCs a better option than personal loans, credit cards and even home equity loans in many cases. The variable-rate structure offers the potential for savings if rates decline further and the flexibility of a HELOC makes it a convenient choice for homeowners planning renovations or other major expenses. As with any type of borrowing, though, it’s important to do your homework and fully understand both the benefits and the possible downsides to ensure that a HELOC is the best option to pursue.

About The Author

Stephen Collopy

See author's posts