Mortgage rates have hovered in the mid- to high-6% range for about three months. As of Aug. 20, the average 30-year fixed mortgage rate was 6.65%, according to Freddie Mac data.
So, if you’re a homeowner interested in taking out a home equity line of credit (HELOC), you’re probably expecting your interest rate to be somewhere around 6.65%, right?
Actually, the national average HELOC rate is 7.31%, based on Bankrate data from Aug. 19.
You might be surprised — even annoyed — that you’d pay a higher interest rate on a HELOC than on a primary mortgage.
But you might be even more surprised to know that 7.31% is an excellent HELOC rate right now. Especially considering how high 30-year fixed rates are.
Why? Because interest rates for first mortgages and second mortgages (which is what a HELOC is) are not based on the same factors. And HELOC interest rates and 30-year fixed rates are typically very different.
Why HELOC rates are usually higher than 30-year mortgage rates
Even though HELOCs and primary mortgages are both types of home loans, they’re impacted by different factors.
HELOC rates are primarily tied to the prime rate, which moves with the federal funds rate. Fixed mortgage rates, meanwhile, are influenced heavily by the 10-year Treasury yield.
“Most HELOCs have variable rates tied to the prime rate, so changes in the Federal Reserve’s interest rate can have a more direct impact on what borrowers pay,” Roger Boschulte, head of home lending products at Bank of America, told TheStreet.
“Traditional mortgages typically have fixed rates that are influenced by longer-term market conditions,” Boschulte continued. “That’s why homeowners may see mortgage rates move one way while HELOC rates move differently or change at a different pace.”
Related: Bank of America names HELOC risk homeowners should know
The prime rate is typically set around 3% above the federal funds rate.
The target range for the federal funds rate has been 3.5% to 3.75% since December 2025. Add 3%, and you get 6.5% to 6.75% (the actual current prime rate is 6.75%). This is below the average HELOC rate, but you might qualify for a lower rate if you have stellar credit.
“While the Fed’s rate decision may impact fixed mortgage rates, it is not the only determining factor,” Erik Schmitt, head of consumer direct sales at JPMorganChase, told TheStreet.
Various factors affect fixed mortgage rates, especially the 10-year Treasury yield. There’s usually a 1.5% to 2% spread between the 10-year yield and the 30-year fixed rate.
The 10-year yield closed at 4.69% on Aug. 20. The average 30-year fixed mortgage rate was 6.65%. That’s a spread of 1.96%.
HELOC interest rates are directly impacted by the prime rate and federal funds rate. Rates on 30-year mortgages are affected by the 10-year Treasury yield. And that’s why the rates are different.
7.31% is actually a good HELOC interest rate
A 7.31% HELOC rate may look high next to today’s 6.65% mortgage rate. But historically, it’s actually a relatively low HELOC rate.
To get a better idea of how HELOC rates might typically work, let’s use January 2024 as an example.
In the first week of 2024, the average Freddie Mac 30-year fixed mortgage rate was 6.62%. Meanwhile, the average HELOC rate was 10.16%, according to Bankrate data.
More HELOCs:
- Do you qualify for a HELOC? Credit score & equity rules explained
- The best HELOC lenders of 2026
- HELOC vs. Cash-out refinance: Costs & tradeoffs
The 30-year mortgage rate was almost identical to today’s rate, but the HELOC rate was much higher. In January 2024, the gap between the average 30-year fixed rate and the average HELOC rate was 3.54%. In August 2026, it was just 0.66%.
So, even though mortgage rates have been stubbornly high so far in 2026, HELOC rates are actually relatively low.
In January 2024, the prime rate was 8.5%, according to JPMorganChase reporting. In August 2026, it’s 6.75%. So, it makes sense that HELOC rates aren’t increasing at the same pace as primary mortgage rates.
Key takeaways: What to know about current HELOC rates
HELOC rates should stay low as long as the federal funds rate and prime rate remain unchanged. If you’re seriously considering a HELOC, today’s low interest rates could be the push you need.
“After the Fed chose to keep the prime rate unchanged last month, our HELOC rates are closer to par with our mortgage rates, giving customers additional borrowing options and reinforcing the appeal of HELOCs for homeowners looking to access equity without refinancing an existing mortgage,” Wendy Morrel, head of relationship retail and home equity strategist with U.S. Bank, told TheStreet.
However, the Fed could increase the federal funds rate. The likelihood of a rate hike at its September meeting is dwindling, but it will probably raise rates at some point.
And that future hike will affect people with HELOCs. Interest rates on HELOCs are typically variable, meaning they adjust periodically. So if the federal funds rate and the prime rate go up, your HELOC rate could, too.
Getting a HELOC is like buying a house or trading stocks. You can’t time it perfectly, and there’s no crystal ball to know what rates will do in the future.
If you’ve already been considering a HELOC, today’s rates are relatively favorable compared with recent years. But the right time to borrow depends on your financial situation, how much equity you have, and what you’ll use the money for — not just the rate.
Related: HELOC vs. home equity loan: Which is better for your situation?
