HELOCs and Home Equity Loans Surge: Why More People Are Borrowing Against Their Homes

The housing market has been on a rollercoaster ride in recent years, with home prices soaring and mortgage rates fluctuating. As a result, homeowners are increasingly turning to home equity loans and lines of credit (HELOCs) to access their home equity. According to the Federal Reserve Bank of New York, consumers increased their balances on HELOCs in the fourth quarter of 2024 by $9 billion to $396 billion, marking the eleventh consecutive quarter of growth after a long decline that began in 2009.

So, why are more people borrowing against their homes? Several factors contribute to this trend:

1. Increasing Home Equity: The steady rise in home prices has led to a significant increase in homeowners' equity. As of 2025, the average homeowner has approximately $311,000 in equity, which is near a record high. This increased equity provides homeowners with more borrowing power and makes home equity loans and HELOCs more attractive options for accessing funds.
2. Cheaper Costs: HELOC rates have been declining, making them more affordable for borrowers. In mid-February 2025, the average HELOC rate was around 8.25%, which is the lowest level in almost two years. This decline reflects the Federal Reserve's lowering of its benchmark interest rate throughout autumn 2024 and is expected to continue in 2025, with rates averaging 7.25%.
3. Higher Mortgage Rates: The rise in mortgage rates has made cash-out refinances less appealing. Many homeowners who locked in record-low mortgage rates during the pandemic are hesitant to refinance at higher rates. As a result, they are turning to HELOCs as an alternative way to tap into their home equity.
4. Lender Approval: The approval process for HELOCs has become more lenient, with lenders approving larger lines of credit and borrowers with lower credit scores. This increased accessibility has contributed to the growth in HELOC originations.
5. Economic Uncertainty: The economic uncertainty and affordability challenges faced by many homeowners have led them to seek alternative sources of funding, such as HELOCs, to cover expenses or consolidate debt.

However, borrowing against home equity is not without risks. Homeowners should carefully consider their financial situation and the potential consequences of taking on additional debt. It is essential to ensure that the borrowed funds will be used responsibly and that the homeowner can comfortably repay the loan.

In conclusion, the surge in HELOCs and home equity loans can be attributed to several factors, including increasing home equity, cheaper costs, higher mortgage rates, lender approval, and economic uncertainty. While these loans can provide homeowners with access to much-needed funds, it is crucial for borrowers to weigh the risks and make informed decisions about their financial future.