In 2025, it’s plain to see that we’re all navigating a more complex financial landscape than usual. And homeowners are no exception! For those with substantial home equity, tapping into that investment can represent a significant financial tool. But with interest rates fluctuating and economic indicators sending mixed signals, the decision to leverage home equity requires careful consideration.
At a Glance: Current Borrowing Landscape
Home Equity Loan Rates:
The national average for a 5-year home equity loan stands at 8.25% as of August 6, 2025.
HELOC Rates:
The average HELOC rate is approximately 8.14%.
Forecasts suggest a potential decrease to 7.25% by late 2025.
Economic Outlook: What Experts Predict
As of spring/summer 2025, the Federal Reserve has paused interest rate hikes, keeping the federal funds rate steady after several tightening cycles aimed at curbing inflation. Current signals suggest that rate cuts could begin in late 2025 — but nothing is guaranteed.
Key insights:
The Fed’s current benchmark interest rate remains in the 5.25% to 5.50% range.
Economists are divided: some expect gradual rate reductions by late 2025, while others caution the Fed may keep things on hold for longer if inflation proves sticky.
Mortgage and home equity rates, while relatively high compared to early pandemic-era lows, may trend slightly lower if inflation continues to cool and the Fed shifts further toward easing.
What this means for you:
HELOCs and variable-rate products could become cheaper later this year if the Fed cuts rates, but that depends heavily on inflation and job market data.
Fixed-rate home equity loans may lock you into today’s relatively high rates, so you should consider weighing the urgency of your funding needs against the potential for lower rates in the near future.
A mild recession or economic slowdown could also prompt rate cuts, but it could become more difficult to qualify for credit if lenders tighten standards.
While international trends (like rate cuts in Australia or Europe) suggest a global pivot toward easing, U.S. monetary policy will continue to follow its own course.
When It Makes Sense to Tap Into Home Equity
1. Home Improvements: Investing in renovations that increase your property's value can be a strategic use of home equity. And getting them done on the timeline that works for you is likely to benefit you more than trying to time the market to save a few points on your rate.
2. Debt Consolidation: Replacing high-interest debts (like credit cards at over 23%) with a lower-interest home equity loan can reduce monthly payments.
3. Emergency Expenses: Unexpected medical bills or urgent financial needs may justify accessing home equity, especially if other resources are limited.
When to Hold Off on Using Home Equity
1. Uncertain Income: If your employment situation is unstable, taking on additional debt may increase financial risk.
2. Short-Term Needs: For temporary financial stopgaps, alternative solutions like personal loans might be more appropriate.
3. Anticipation of Lower Rates: As forecasts suggest the possibility of declining interest rates, waiting could secure more favorable borrowing terms – assuming your plans are not time-sensitive.
So, Should You Tap Into Your Home Equity Now?
The answer largely depends on what you plan to do with the funds, and how time-sensitive those plans are. The bottom line is that rates are relatively high at the moment, especially compared to the ultra-low rates of 2020-2021. And there is a realistic possibility that borrowing could become cheaper later in 2025, especially for variable-rate products like HELOCs.
However, timing the market is tricky, and in many cases, not worth the stress. If you need funds for a strategic reason now (like a major renovation or consolidating high-interest debt), borrowing may still make sense.
Disclaimer: This content is for informational and educational purposes only and does not constitute financial, legal, or lending advice. Loan terms and availability vary by lender and state. Consult a qualified financial professional or lender for personalized guidance tailored to your situation.
Unison Mortgage Corp NMLS ID 2574289
About the Author
Unison
We're the pioneers of equity sharing, offering innovative ways for you to gain access to the equity in your home. For more than a decade, we have helped over 12,000 homeowners to pursue their financial goals, from home renovations to debt consolidation, retirement savings, and more.
