Home equity loans become more affordable as Fed cuts rates
- Homeowners in the U.S. now hold an average of $300,000 in home equity.
- Current average home equity loan rates vary, with 5-year loans at 8.21% and 10-year loans at 8.36%.
- This is a favorable time for borrowers to consider home equity loans as rates are expected to further decrease.
In the United States, home equity levels have reached a record high as of the third quarter of 2025, enabling homeowners to access substantial funds. The average homeowner now possesses approximately $300,000 worth of home equity to borrow, a figure that has spurred an increase in borrowing capabilities. Concurrently, home equity loan rates have become cheaper than traditional credit sources such as credit cards and personal loans. This trend is partially attributed to the Federal Reserve's renewed interest-rate cut campaign, which began in 2024, aimed at stimulating economic growth. Average rates for home equity loans currently stand at around 8.21% for five-year terms, 8.36% for ten-year terms, and 8.24% for fifteen-year terms. Borrowers are advised to seek competitive rates and explore various lending options to secure favorable terms while being conscious of their repayment capabilities. This situation presents an enticing opportunity for potential borrowers, although it carries inherent risks, including the possibility of foreclosure if repayments are not maintained. With this in mind, prospective borrowers should compare offers and assess their financial situations carefully to ensure they make informed decisions about their home equity financing options. The shift towards the affordability of home equity loans as a result of Fed actions encourages increased borrowing, which may further impact the housing market and the associated economy.