Home Equity Lending Hit Highest Level Since 2008
Min 1: Average Borrower Lost $13,400 in Equity Year-Over-Year
Here's the paradox: homeowners with mortgages saw collective equity of $17.1 trillion in third quarter 2025, but that actually decreased by $13,400 per borrower annually according to Cotality data. The average mortgaged homeowner still sits on about $299,000 in equity despite the annual decline. U.S. borrowers combined to lose $373.8 billion—a decrease of 2.1%—in home equity annually during third quarter. This contrasts with homeowners gaining $25,000 in equity over 2023 and $4,900 over 2024, showing how home price deceleration reversed years of rapid appreciation. The equity tap despite declining values shows homeowners need liquidity regardless of market conditions.
Min 2: HELOC Rates Average 7.81% Versus 8% Loans
Current average rates on home equity loans sit in the low 8% range while HELOC rates average slightly lower at 7.81% according to December market tracking. These rates remain far below credit card APRs sitting above 20% and personal loan rates over 12%, making home equity products attractive for consolidating high-interest debt. HELOC rates work differently than primary mortgages—they're based on an index rate plus a margin, often the prime rate at 6.75% plus lender margin around 0.75% for total 7.50% rate. Variable HELOC rates will fall if the Fed continues cutting, unlike fixed-rate home equity loans that lock in today's pricing. A homeowner pulling $50,000 from a HELOC at 7.50% pays monthly interest-only during the draw period, then begins principal payments during repayment phase.
Min 3: Homeowners Consolidating Expensive Debt Payments
The surge in home equity borrowing comes as people look to HELOCs and home equity loans to consolidate more expensive debt payments into more manageable monthly payment according to Churchill Mortgage's Jordan Del Palacio. With credit card balances carrying 20%-plus rates, homeowners with significant equity find immediate savings by tapping home wealth at 7% to 8%. The math works: a homeowner with $40,000 in credit card debt at 22% paying $880 monthly in interest can refinance into HELOC at 7.55% paying just $250 monthly in interest—saving $630 per month while maintaining tax deductibility if used for home improvements. The strategy requires discipline to avoid running up credit card balances again after consolidation.
Min 4: Home Price Growth Slowed Throughout 2025
The equity lending surge happened despite home price growth slowing throughout 2025. January recorded stable 3.4% annual increases but by October home price growth dropped to just 1.1%—the lowest since 2012 according to Cotality. At start of year, only six metros posted year-over-year price drops but by October that number surged to 32, spreading beyond Florida into Texas, California, and the Mountain West. CoreLogic projects home price appreciation of just 1.4% for next year, suggesting equity growth continues but at modest pace as combination of gradually rising home values and ongoing mortgage principal payments helps homeowners continue building wealth. Markets where prices fell over last year will report some equity losses and may continue seeing those next year as well.
Min 5: Limited Inventory Keeps Prices From Falling Further
Limited housing inventory significantly influenced home prices and consequently home equity in recent years, a trend that continues into 2026 according to Splitero CEO Michael Gifford. Home equity will continue rising in 2025 as inventory shortages keep prices on upswing while higher interest rates deter homeowners from selling. The Federal Reserve estimates homeowners have $36 trillion in equity locked within homes—a staggering amount of untapped wealth. For homeowners with low primary mortgage rates and chunk of equity in their house, it's one of the best times to get a HELOC because they don't give up that great mortgage rate while using cash drawn from equity for home improvements, repairs, and upgrades. An investor who partners with HELOC lenders to provide renovation capital for flips can leverage homeowner equity without deploying own capital, earning fees on project management while homeowner captures appreciation after improvements.
The Takeaway
Home equity lending hit highest level since 2008 during first three quarters of 2025 with lenders originating 557,000 new loans totaling $31.6 billion as borrowers tap record housing wealth of $48.6 trillion despite average homeowner losing $13,400 in equity year-over-year leaving them with $299,000 tappable wealth. HELOC rates average 7.81% versus home equity loans at 8%, far below 20% credit card rates driving debt consolidation as homeowners with $40,000 in credit card debt at 22% save $630 monthly by tapping home equity. Equity lending surged despite home price growth slowing from 3.4% annually in January to just 1.1% by October—lowest since 2012—with 32 metros posting year-over-year declines spreading beyond Florida into Texas and California. Limited inventory shortages keep prices elevated preventing further declines as Federal Reserve estimates homeowners hold $36 trillion in equity locked within homes, with CoreLogic projecting 1.4% appreciation next year. Investors partnering with HELOC lenders to provide renovation capital for flips leverage homeowner equity without deploying own capital, earning project management fees while homeowners capture post-improvement appreciation in market where equity remains most accessible financing source despite slowing price growth.
