August 2025 - AltPDX

HELOC balances as of 2025

Arecent report from the New York Federal Reserve Bank revealed that U.S. consumer debt reached a record high of $18.2 trillion in the first quarter of 2025. Mortgages accounted for the largest portion, totaling $12.8 trillion—an increase of $199 billion from the last quarter in 2024.

Serious delinquency rates also rose, with 4.3% of total debt now classified as delinquent.

Notably, balances on home equity lines of credit (HELOCs) were up $6 billion, rising to $402 billion in total. That’s $85 billion above the low that was reached in the first quarter of 2022.

This sharp increase comes as no surprise, given that HELOCs typically offer lower interest rates compared to personal loans and credit cards, along with higher borrowing limits. At a time when inflation continues to be high and homeowners find themselves in dire need of extra funds, HELOCs are clearly as popular as ever—but is it the right money move for you?

What is a HELOC?

A HELOC allows you to tap into your home equity, which is the difference between your home’s value and what you owe on your mortgage. Instead of a lump sum of money, you’ll receive a credit limit (typically 80% to 85% of your equity) that you can draw from as you want to. In most cases, HELOCs are tied to a variable interest rate, which will fluctuate based on market conditions.

Typically, you access the funds through your bank, a check, wire transfer or, sometimes, a credit card.

“HELOCS are usually used for big-ticket items, like home remodeling projects or long-term care medical expenses. I had to update my home’s foundation, so I took out a HELOC, received the money to pay for the repairs and quickly paid off the loan,” says Shelby Rothman, certified financial planner and founder at EnJoy Financial in Los Angeles.

Why HELOCs have become so popular in recent years

Rothman explains that your home equity is one of the most, if not the most, valuable assets you own. A HELOC can provide you with a significant amount of money that can be accessed very quickly and for a specific purpose. With a HELOC, you don’t have to deal with the high expense or hassle of refinancing.

“Many homeowners have ultra low rates on their current mortgage and don’t want to lose that rate with a refinance. A HELOC keeps the current mortgage and goes behind it in a second lien,” explains Jeremy Schachter, branch manager at Fairway Independent Mortgage Corporation in Phoenix.

“One of the biggest benefits to using a HELOC is that your home continues to rise in value even as you’re using money against it. On the contrary, if you access money from the stock market or a 401(k) loan, you’re missing out on the potential gains as you work to pay the loan back,” Rothman adds.

One good example of how HELOCs are coming in handy these days? Rothman shares she recently worked with clients who wanted to build an Accessory Dwelling Unit, or ADU, in their backyard. They leveraged their home equity with a HELOC as it offered an easy way to access the cash for their project and pay it off in five years. Now, not only have they put an addition onto their home that will increase their value, but they were able to use their own money to do it.

The problem with HELOCs

While HELOCs are an attractive financing solution for a number of reasons, they’re not perfect. Right now, the biggest drawback for homeowners are the current loan rates.

“Since the interest rate on a HELOC is usually variable, it could rise to a point where you aren’t able to pay off the loan,” Rothman says. “Before utilizing a HELOC, you should have a plan to pay it off as quickly as possible.”

She also warns homeowners about using a HELOC too often.

“Doing so can continually eat away at your home equity, especially if you’re unable to pay it off,” Rothman explains.

It’s also important to note that a HELOC can put your home on the line. If you fail to repay your loan, your lender may foreclose your property as it serves as collateral.

For this and similar articles, please visit Realtor.com

Mortgage Rates for New Homes Are Typically Lower, New Research Finds

Homebuyers who purchase newly built homes are typically saving about half a percentage point on their mortgage rate, likely due to incentives from homebuilders, new research has found.

Last year, the average mortgage rate for buyers of new-construction homes was 6.1%, compared with an average of 6.6% for buyers of previously owned homes, according to the Realtor.com® economic research team’s New Construction Report released on Thursday.

The finding, derived from deed data, shows bigger interest rate savings for new-home buyers than previous surveys of homebuilders had indicated, suggesting that many builders are quietly offering mortgage rate buy-downs that are larger than advertised.

The half-point reduction in interest rates translates to savings of about $105 a month for mortgage payments on a $400,000 home, assuming the buyer put 20% down on a 30-year fixed home loan.

Recent mortgage application data shows that affordability-strapped buyers are keenly sensitive to even small movements in rates, likely making the savings from a half-point rate reduction a significant purchase incentive.

The main reason that mortgage rates are lower for new homes is that builders are offering below-market rates to buyers as an incentive to close deals, primarily through mortgage rate buy-downs, says Realtor.com senior economist Joel Berner.

A buy-down involves paying an up-front fee, known as points, to secure a lower rate, either temporarily or over the life of the loan.

While anyone can buy down their mortgage rate when taking out a loan, the tactic is popular with new builds, because homebuilders often cover the points fee as a marketing incentive for buyers.

“Some builders have in-house financing wings, and others have close relationships with lenders that allow them more flexibility than existing-home sellers have when it comes to using mortgage rates as a marketing tool,” says Berner.

The half-point rate reduction for new-home buyers in 2024 ties with 2023 for the biggest mortgage rate saving for new-home buyers in at least a decade, according to the report.

New-home buyers saw virtually no savings versus existing homes during the period of ultralow interest rates from 2020 to 2021, indicating that few builders were offering buy-downs during that period.

“What’s driving the gap wider is simply that mortgage rates are higher, which makes below-market rates more attractive and more effective in getting new builds sold, so more buy-downs are being offered,” says Berner.

After spending more than a decade below 5%, mortgage rates have remained above 6% since late 2022, contributing to some of the worst affordability conditions for homebuyers in more than 40 years.

Since the beginning of this year, rates have hovered in a narrow range above 6.6%, most recently averaging 6.76% for the week ending May 8, according to Freddie Mac.

For this and similar articles, please visit Realtor.com