Why home equity loan lending is rising (and what to do about it)
The average home equity level is currently near $330,000, and if you're looking to access some of that money, or already have, you're not alone. According to data analytics company CoreLogic, home equity loan lending hit its highest level since 2008 earlier this year. During the first two quarters of the year, "lenders originated more than 333,000 new home equity loans totaling about $23.6 billion," the company noted. "Home equity counts and amounts increased by 40% and 69%, respectively, year-over-year in 2024."
While borrowers have a variety of options to utilize to access their home equity, two of the more popular ones include home equity loans and home equity lines of credit (HELOCs). HELOC activity dropped in 2024 after hitting a 15-year high in 2022, according to CoreLogic. But home equity loan lending, as noted, has remained strong. And, if you understand the current rate climate, it's easy to understand why. Below, we'll break down three reasons why home equity loan lending is on the rise – and why you may want to open a loan, too.
Start by seeing what home equity loan rate you could qualify for here.
Why home equity lending is rising (and what to do about it)
Not familiar with the timely benefits of home equity loans? Here, in part, is why many homeowners are turning to this borrowing source now:
Lower interest rates
While inflation is on the decline and interest rates were just cut, it will take time for rates to significantly decline on borrowing products. Right now, personal loans are averaging close to 13% while credit cards are near a record 23%. But home equity loans are averaging just 8.36% right now and they could fall again if the Federal Reserve cuts rates as anticipated in November and December.
Compared to the alternatives, then, home equity loans are the cheapest option. And they come with a fixed interest rate, allowing borrowers to accurately budget even if the wider rate climate ticks back up in the future.
Get started with a home equity loan now.
More borrowing potential
Personal loans are often capped at $100,000. Credit cards, meanwhile, come with their inherent borrowing limits, which are often significantly below that six-figure threshold, depending on the user. The average home equity amount right now, however, as noted above, is over $300,000. And while most lenders will want borrowers to maintain 20% equity, that still leaves the median homeowner with hundreds of thousands of dollars to access right now.
That said, home equity is calculated by your home's current worth, minus what you owe to your lender. So it could drop in the future. Knowing this, then, it makes sense to take action now while your equity level is high and interest rates are reasonable.
Tax benefits
If you're planning on using your home equity loan for home repairs and renovations, however, you shouldn't get too overwhelmed by current interest rate considerations. That's because the interest you pay on a home equity loan is tax deductible if used for eligible home projects. "Interest on home equity loans and lines of credit are deductible only if the borrowed funds are used to buy, build, or substantially improve the taxpayer's home that secures the loan," the IRS explains online. "The loan must be secured by the taxpayer's main home or second home (qualified residence), and meet other requirements."
The bottom line
Home equity loan lending has increased this year, and at a quick glance, it's easy to understand why. Home equity loans have lower interest rates than many alternatives, more borrowing potential and unique tax benefits. That all noted, home equity lenders do use your home as collateral in this exchange, so it's crucial to only borrow as much as you can afford to pay back as you could risk losing your home if you can't.
Have more home equity loan questions? Learn more here.
