NEW YORK, Sept. 4 — The average home equity loan rate is 8.13% as of Sept. 1, according to Bankrate’s regular survey of rates, with the average range between 5.90% and 10.75%. Rates vary by term length. The bottom line: borrowing costs on home equity loans are elevated, and the path forward depends heavily on the Federal Reserve’s next move.
At the beginning of 2026, mortgage rates were close to 6.00%, but by July they hit their highest levels in nearly a year. Rates are expected to remain elevated as high oil prices, geopolitical uncertainty and an AI boom leave many worried about inflation.
If inflation gets too high, the Federal Reserve typically increases the federal-funds rate to help bring it down. At the conclusion of its committee meeting on July 29, 2026, the Federal Reserve announced it would hold rates steady for the fifth time that year. The decision was largely expected but drew pushback, as three officials voted to increase rates by a quarter point.
As of early September 2026, the majority of experts predict the committee will raise rates at its meeting that month. Home equity loan interest rates are impacted by market conditions, Federal Reserve policies, lender requirements and personal financial situations.
While first mortgage rates are impacted by the 10-year Treasury note, home equity loan rates are influenced to a greater degree by the federal-funds rate. When the Fed cuts its benchmark rate, home equity loan rates tend to fall in response. A home equity loan is a type of debt based on how much ownership a borrower has built up in a house, expressed as the difference between the amount still owed on the mortgage and the house’s market value.
For example, if a borrower owes $280,000 on a house worth $350,000, they have $70,000 in equity. Lenders typically allow borrowing up to between 80% and 90% of a home’s value, minus what is owed on the first mortgage. In the example, borrowing up to 90% would limit the borrower to $35,000 ($350,000 x 0.90 = $315,000, minus the $280,000 mortgage balance).
Most home equity loan interest rates are fixed, with common terms of 10 or 15 years. Funds can be used for home improvements, debt consolidation, major purchases or other financial goals.
Because the loan is secured by home value, failure to make payments can lead to foreclosure. Personal factors affecting rates include credit history, amount borrowed, term length and income. To qualify for the best rate, borrowers should increase credit scores, reduce overall debt, and shop around and compare lenders.
Borrowers should also review alternatives, such as a home equity line of credit (HELOC), which provides a line of credit rather than a lump sum and generally carries variable rates. What to watch next: the Fed’s September meeting.
A rate hike would likely push home equity loan costs higher; a hold would leave them hovering near current levels.
