Interest Dip in HELOCs: Attractive Entry Opportunities for Homeowners

The market for Home Equity Lines of Credit (HELOCs) is currently showing a positive trend, as the average interest rates have dropped to 8.47%. Introductory rates, which are below 6%, are particularly attractive. Many anticipate two further interest rate cuts by the Fed by the end of the year, which is intensifying competition among leading HELOC providers to attract homeowners with high property values. According to Bank of America, the leading HELOC provider, the national average interest rate for a two-phase HELOC with a ten-year draw period is typically 8.47%. These rates apply after a six-month introductory rate of 5.99% in most regions. Depending on the location, average interest rates vary between 7.8% and 9.34%. In 2024, the total value of locked-in home equity is expected to exceed $34 trillion - this is the third-highest value ever recorded. For homeowners with existing mortgages over 6%, selling the home is often not an attractive option. Instead, a HELOC offers the possibility to flexibly access the built-up equity. This involves using only the required amount, thereby avoiding unnecessary interest costs. HELOC rates differ from primary mortgage rates and are based on a prime rate plus a margin that varies by provider. The current prime rate is 7.25%, with a 1% margin raising the HELOC rate to 8.25%. Providers such as Achieve.com lure customers with attractive introductory rates starting at 6.24%. While the variety of offers is large, factors such as creditworthiness, debt ratio, and the credit line amount influence the final conditions. Homeowners should ensure they compare providers to secure the best terms, as interest rates can range from just under 7% to as high as 18%.