How much further can HELOC rates fall in 2025? Lending experts weigh in

Interest rates are cooling overall, which has led to more affordable costs on borrowing products like mortgages, personal loans and other lending options. But home equity lines of credit (HELOCs), in particular, have become significantly more affordable over the past year.

One of the primary drivers of the recent rate declines has been the Federal Reserve, which cut its benchmark rate three times to close out 2024, leading the federal funds rate to decline by a full point. As is often the case, average HELOC rates fell in tandem, dropping from 9.36% in September 2024 to 8.48% by the end of the year. 

And, HELOC rates have continued to decline in 2025, though it hasn’t been linear. Right now, the average HELOC rate is sitting at 7.86%, and with the Fed widely expected to make two additional rate cuts this year, HELOC rates could fall even further before the end of 2025. But by how much will they fall? 

Find out how affordable the right home equity borrowing product could be now.

How much further can HELOC rates drop in 2025?

“I expect the Fed to cut rates twice before the end of the year and for HELOC rates to come down about half a percentage point in response,” says Heather Long, chief economist at Navy Federal Credit Union. 

HELOC rates respond quickly to Fed rate cuts, Long says, and lower rates could make HELOCs even more attractive for households in need of cash. 

Andrew Schmidt, a home loan specialist at Churchill Mortgage, offers a similar outlook from the lender’s side. 

“HELOCs should see an immediate drop when the Fed lowers rates, possibly 0.5% more this year,” Schmidt says. He attributes the lower rates to the traditional tie between the Fed rate drop and adjustable-rate HELOCs.

Wendy Morrell, who oversees home equity strategy as head of relationship retail at U.S. Bank, is among the experts expecting federal funds rate cuts and, ultimately, lower HELOC rates. 

“We expect home equity rates to align with Fed rate cuts,” Morrell says.

If HELOC rates do fall further in response to Fed rate cuts, it could take about a month before lender rates reflect the change, says Jamie Slavin, mortgage production manager at Ent Credit Union. 

“They will work in tandem with the Fed funds rate at a staggered pace,” Slavin says. “The Fed makes an announcement on a rate cut, and the following month, the prime rate, which affects HELOCs, is updated for new and existing loans.”

Historically, when the Fed cuts rates, homeowners tend to move into HELOCs to take advantage of lower borrowing costs, Long says. And, while she expects to see the same pattern this time, homeowners have even more incentive to choose a HELOC right now.  

“The unique aspect about 2025 is the large number of homeowners who have a 30-year mortgage rate below 5%. These lucky homeowners are reluctant to move, so they are looking for ways to renovate their current home,” Long says. “The rapid gains in home prices also make HELOCs a good option to access some additional cash without having to refinance.”

Compare your HELOC and home equity loan rates to find the right options today.

Home equity loans can be a beneficial alternative

While HELOCs are worth a look for financing a home renovation, consolidating high-rate debt or covering another major expense, they’re not for everyone, especially those who are uneasy about variable rates. HELOCs can be more attractive when rates are falling, but it’s still unclear how far they’ll drop or whether cuts will continue into 2026.

As such, you may prefer the predictability a home equity loan can bring to your budget. With this type of home equity borrowing, you’ll lock in a fixed interest rate and a monthly payment that never changes. As a result, a home equity loan can be a good option if you need a single lump sum upfront for a one-time cost, like college tuition or adding an extra room, and don’t expect to borrow again after the initial disbursement.

Right now, average home equity loan rates are slightly higher than those for HELOCs, but some lenders are offering rates in the mid-7% range. 

The bottom line

The CME FedWatch Tool predicts a 96.7% likelihood the Fed will cut rates at its meeting this week and a 94.8% chance they will do so again in December, for a total drop of 0.50%. If that happens, experts anticipate HELOC rates could fall in a similar fashion. Still, the rate you’re offered on a HELOC will likely depend on additional factors, including your credit score, home equity amount and loan-to-value ratio. If you want to access your home equity for cash, be sure to compare offers from multiple lenders to find the lowest rate. Also, review the terms and repayment schedule carefully to make sure you can comfortably manage the payments both now and in the future.