What is the HELOC interest rate forecast for 2026?

Home equity borrowing rates have been on the decline over the last 18 months. While home equity line of credit (HELOC) rates averaged 9.18% last June, the same rates now sit just below 8%, according to Bankrate data. That drop has been largely due to the Federal Reserve rate cuts that have occurred since September 2024. At today's lower rates, you could save thousands of dollars in interest on a typical HELOC compared to what borrowers faced in mid-2024.

And, as 2025 comes to a close, it's a good time to consider whether a HELOC is the right borrowing option to cover your major expenses next year, whether that's to renovate your home, consolidate debt or achieve another goal. But whether you should take that HELOC out now or later will likely come down to what you think will happen with home equity rates next year. So, will HELOC rates continue to fall, or is it more likely they'll hold steady or even rise in 2026?  

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What is the HELOC interest rate forecast for 2026?

We'll explore the possible scenarios that could occur for HELOC rates in 2026 below.

What needs to happen for HELOC rates to fall in 2026

Most HELOCs follow the prime rate, which tends to fluctuate whenever the Federal Reserve adjusts its benchmark rate. 

"If the Fed keeps cutting interest rates in 2026, as it is widely expected to do, HELOC rates will keep falling. It's possible HELOC rates could come down a full percentage point in 2026 as the Fed lowers interest rates to just below 3%. There's a high likelihood HELOC rates will be even more attractive to consumers next year," Heather Long, chief economist at Navy Federal Credit Union, says. 

Long projects an 85% probability that HELOC rates fall in 2026.

Shmuel Shayowitz, the president and chief lending officer at Approved Funding, is also optimistic that borrowers will enjoy more favorable rates next year. 

"I anticipate that the Fed will cut rates by 25 basis points at their December meeting, especially after [the] worse-than-expected ADP (Automatic Data Processing) employment report," Shayowitz says. "It is also expected that there will be at least one more 25- to 50-basis-point cut in 2026."

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What needs to happen for HELOC rates to rise in 2026

For HELOC rates to rise next year, the Fed would need to begin raising rates again. Long believes the likelihood of this happening is only 5%. 

"HELOC rates could rise in 2026 if the Federal Reserve has to raise interest rates to fight inflation," Long says. "While this is not my forecast for 2026, it is a possibility, especially if stagflation takes hold. It would be painful for the economy and for anyone seeking access to credit, including HELOCs."

Similarly, Erik Schmitt, a consumer direct executive for home lending at Chase Home Lending, says a rate increase is less probable but possible if inflation spurs the Fed to respond. 

"Rates could increase if the Fed raises the federal funds rate to curb consumer spending in response to high or rising inflation. This would push HELOC rates higher," Schmitt says. 

Still, Schmitt thinks that's unlikely to happen since inflation has remained low and stable throughout 2025.

"There is a zero percent chance that HELOC rates will rise in 2026," Shayowitz says.

What needs to happen for HELOC rates to stay constant in 2026

The Federal Reserve's dual mandate is to keep inflation low and employment strong. In turn, the Fed would have little reason to raise or cut rates if inflation holds near the agency's target and employment is stable. 

Long says there's a 10% chance HELOC rates finish 2026 near where they start, even if they fluctuate during the year. 

"It's possible HELOCs could end 2026 around the same levels they began, but it will not be a stable level all year," she says. "There is a possibility that HELOC rates fall earlier in the year and then rise if the nation ends up in stagflation." 

But the Fed has signaled more rate cuts ahead, Long says, and that is what the markets expect. If inflation picks up, however, the Fed could pause or raise rates, and that could cause HELOC rates to fluctuate.

Should you consider a home equity loan instead?

Remember, the Federal Reserve doesn't set HELOC rates, but they do tend to move in tandem. So, if the Fed cuts or raises interest rates, your HELOC is likely to do the same because it has a variable rate.

If you'd prefer a more predictable rate and payment, a home equity loan may be a better option. These loans come with a fixed rate and monthly payments that stay consistent over time. And, rather than drawing on a credit line, you receive all the loan funds up front, which works out well if you have a project or expense and you don't expect the cost to change.

The bottom line

The experts above note that rate cuts are much more likely in 2026 than hikes or pauses. Since HELOC rates are variable, the rate you receive could move lower if the Fed keeps cutting next year, though it can also rise in future years when the Fed raises rates again. If you decide to move forward with a HELOC or a home equity loan, it helps to shop around to find the best rates and terms that fit your needs.