HELOC rates fall, making them cheaper than loans

HELOC interest rates have dropped to near two-year lows, averaging 8.04%, nearly two percentage points lower than September 2024. This makes HELOCs cheaper than home equity loans, which are currently higher by about 0.4 to 0.5 percentage points. The decline in HELOC rates is linked to recent Federal Reserve rate cuts, which have lowered the prime rate used to set these rates. HELOCs offer variable rates, while home equity loans have fixed rates, contributing to the current rate difference. HELOCs provide flexibility, allowing homeowners to draw funds as needed, unlike home equity loans that disburse a lump sum. This combination of lower rates and flexibility makes HELOCs an attractive option for homeowners looking to access their equity.