The ups and downs in the home equity line of credit (HELOC) interest rate climate continue unabated, new data released this week shows. The average HELOC interest rate declined by five basis points to 8.22%, according to new data. That comes after rates here spiked from 8.14% to 8.27% earlier in June, but it follows an overall steady decline for much of 2024 and 2025. At one point earlier this spring, HELOC interest rates were steadily below 8% – more than two full percentage points lower than they were in September 2024. But that downward trend has been slowed recently, with predictions on where HELOC rates could be headed later this year varying.

For homeowners looking to borrow equity, these changes lead to a series of questions and considerations. With the average home equity amount high now, and growing in parts of the country, home equity borrowing could be the optimal way to access a large, six-figure sum of money right now. But should it be done with a HELOC, especially considering the fluctuations in rates lately? Below, we'll break down three things homeowners should consider now that can help better inform the answer.

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3 things homeowners should consider with HELOC rates falling again

Don't jump into the HELOC borrowing market before first considering these three factors now:

The volatility in the interest rate climate

The Federal Reserve issued three rate cuts toward the end of 2024, paused them for the first half of 2025 and is now poised to resume that rate cut campaign later this summer. This could cause some volatility in the interest rate climate and it will inevitably impact HELOC rates. Rates here have been rising and falling routinely in recent weeks, making budgeting difficult both for prospective borrowers and existing ones, thanks to the variable rate the product comes with. 

Since rates here can change monthly, your payments can, too, perhaps to a significant degree. This doesn't mean that you shouldn't automatically avoid the use of a HELOC (it remains one of the cheapest ways to borrow equity now), but it does mean that some volatility will need to be priced into your budget to avoid any costly surprises.

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The benefits of a fixed-rate home equity loan

The average home equity loan interest rate is 8.25%, just three basis points higher than a HELOC is right now. And, unlike a HELOC, that rate is fixed, offering savers peace of mind in today's unpredictable rate climate. This benefit is a critical one for homeowners, as the home functions as collateral in these exchanges and, accordingly, it could be lost back to the bank if payments can't be made as agreed to. 

The chances of this happening with a fixed-rate home equity loan, however, in which repayments can be calculated with precision, are generally lower than they'd be with a variable-rate HELOC. That noted, homeowners also won't be able to exploit future rate decreases as easily, as the home equity loan will need to be refinanced, while the HELOC rate will adjust independently. Still, the fixed-rate home equity loan could be worth it if you need the funds now and want to be able to budget the repayments of those funds accurately.

Other home equity borrowing alternatives

HELOCs and home equity loans may be two of the more well-known ways to borrow home equity but they're not your only options. Cash-out refinancing could be beneficial for those homeowners currently saddled with above-average mortgage rates. In this instance, homeowners take out a new mortgage loan to pay off their existing one and keep the difference between the two as cash. While not beneficial for homeowners with low rates, this could make sense for those who have rates over 7% now and for those who have seen their home value surge in recent years. 

Reverse mortgages, meanwhile, for homeowners over age 62, may also be worth it as they won't come with many of the repayment concerns (and cost calculations) that home equity loans and HELOCs do right now. There is no uniform way to borrow home equity, so it makes sense to explore all of your options before getting started.

The bottom line

A decline in HELOC rates this week may be welcome, but that drop could be short-lived if recent activity is any reliable indicator of future rate movements. Homeowners, then, should take a step back to evaluate the volatility in the broader interest rate climate. By doing so, considering the benefits of a fixed-rate home equity loan instead and by comparing all home equity borrowing options side by side, they can make a more well-rounded, financially sound decision that can benefit them both now and into the future.