Will HELOC interest rates drop again this May?

Homeowners who borrowed from their home equity with a home equity line of credit had a welcome start to 2025 as interest rates on the product consistently declined. HELOC rates fell to an 18-month low in February and followed that drop by hitting two-year lows in March. And that trend looked to continue at the start of April when rates fell below 8%, marking a more than two percentage point drop in just over seven months. But that decline was reversed a bit in the following weeks, as market turbulence caused rates on the product to rise before declining again at the end of April to below 8% (albeit slightly higher than the 7.90% it hit at the start of the month).

All of these changes are particularly important when borrowing with a HELOC, as the product has a variable rate that will adjust monthly for borrowers. And while that’s an obvious advantage when rates are consistently declining, it could be problematic when rates are volatile or when they rise again. This takes on added concern in today’s economic climate in which inflation is low but interest rates are on pause and stock market uncertainty is pronounced. Heading into May 2025, then, can prospective and current HELOC borrowers expect rates to fall again? That’s what we’ll examine below.

See how low a HELOC interest rate you’d currently qualify for here.

Will HELOC interest rates drop again this May?

When examining the future of interest rates on any borrowing product, it’s important to remember that speculating over rates is just that – speculation. It’s impossible to do with certainty. That disclaimer noted, if the economic trends of early 2025 continue, then, yes, it’s likely that HELOC rates will drop again this May, perhaps as soon as this week.

On Friday, May 2, the unemployment report for April will be released. If that shows strength, it could give the Federal Reserve additional motivation to issue another Fed rate cut. That scenario could lead to lower HELOC interest rate offers from lenders, even though the central bank doesn’t meet again until May 6 and May 7. 

And, obviously, if the Fed issues a rate cut at its May meeting (which appears unlikely right now), then HELOC rates could decline further. But even if they don’t, a simple hint toward a rate cut for when the bank meets again in June could be enough of a motivating factor for HELOC rates to decline, as could another drop in the inflation report when the next reading (for April) is released on May 13.

Borrowers should also remember that these considerations are fluid and some developments could be positive and some could be negative, so mixed signals here could result in rates stagnating a bit, too. Unpredictable economic policies, as was seen in early April, could also skew the interest rate climate in ways that may not be beneficial for borrowers or those considering a HELOC. It’s critical to keep this in mind since you’ll have to pay a variable rate each month based on market conditions that are largely out of your control. 

So, yes, HELOC interest rates are likely to drop again in May but that assumption is based more on recent trends versus unpredictable market changes. Should concerns over stock market performance and economic policies become more pronounced in the month, rates here could easily reverse course.

Understanding this evolving dynamic, then, homeowners may also want to consider their fixed-rate home equity loan options. Home equity loan interest rates are only slightly higher than HELOCs right now (8.36% versus 7.94%) and the rate that’s locked in now won’t be responsive to the same market dynamics the variable HELOC will be. 

Additionally, homeowners could always refinance their home equity loan into a lower, fixed rate or even into a HELOC, in the future, should rates decline considerably then. Explore your home equity borrowing options with both products, then, before formally applying.

Compare HELOC and home equity loan offers and costs here now.

The bottom line

HELOC interest rates could continue their decline towards 7% in May but borrowers shouldn’t rely on a drop when borrowing from their most important financial asset. Failure to repay could lead to foreclosure. So it’s important to have a realistic approach to HELOC rates right now and, when unsure of affordability, consider the fixed-rate home equity loan as a viable alternative, at least through this unpredictable economic climate.