The HELOAN Resurgence
Home equity loans (fixed-rate, closed-end second mortgages) have experienced a dramatic reversal of fortune. After more than a decade of steady decline from their 2007 peak of $1.14 trillion, total HELOAN balances bottomed at $441 billion in 2020 before rebounding to $562 billion by year-end 2024, according to theFederal Reserve's Z.1 Financial Accounts.
This resurgence is driven by a powerful combination: record home equity, a "rate lock-in" effect that discourages homeowners from refinancing their low-rate first mortgages, and the appeal of fixed monthly payments in an uncertain rate environment.
The Rate Lock-In Effect
More than 80% of outstanding mortgages carry rates below 5%, effectively locking homeowners out of traditional cash-out refinancing without a significant increase in their monthly payment. This dynamic has channeled borrowing demand toward second-lien products (HELOANs and HELOCs) where homeowners can tap equity without disturbing their low-rate first mortgage.
HELOAN originations surged 47% in 2022, the most new originations since 2010, per TransUnion. After a brief cooling in 2023 as rates climbed past 9%, origination growth rebounded to six consecutive quarters of year-over-year expansion through Q3 2025, reaching approximately 362,000 quarterly originations.
HELOANs vs. HELOCs
The split between HELOANs and HELOCs reflects borrower preferences around rate certainty. HELOANs offer a fixed rate for the life of the loan, appealing when borrowers expect rates to remain elevated or rise. HELOCs offer variable rates tied to prime, currently lower at 7.18% versus the HELOAN's 7.84% for a 5-year term (Bankrate, March 2026).
In Q3 2025, HELOANs and HELOCs split nearly 50/50 in origination volume: approximately 362,000 HELOANs versus 352,000 HELOCs. This near-parity marks a significant shift from the pre-2020 era when HELOCs dominated the second-lien market.
Interest Rate Trajectory
HELOAN rates peaked in the 9–10% range in late 2023 and early 2024 as the Federal Reserve maintained restrictive policy. Since then, the combination of Fed rate cuts and moderating Treasury yields has pushed the average 5-year HELOAN rate to 7.84% as of March 2026, a three-year low.
Unlike HELOCs, which are directly tied to the prime rate, HELOAN rates track the 10-year Treasury yield plus a spread. Bankrate's 2026 forecast projects average HELOAN rates in the 7.5% to 8.0% range, with further easing possible if inflation remains contained.
$11 Trillion in Tappable Equity
The fuel behind the HELOAN boom is the extraordinary accumulation of home equity. ICE Mortgage Monitor reported approximately $11 trillion in tappable equity (equity available while maintaining a 20% cushion) across 48 million homeowners as of Q4 2025.
Despite the growth in second-lien borrowing, homeowners have accessed only a fraction of this capacity. The $562 billion in outstanding HELOANs represents roughly 5% of tappable equity (far below the pre-crisis levels when second-lien debt relative to equity approached 15–20%. In 2025, homeowners withdrew a record $205 billion in equity, with $116 billion via second-lien products) the highest annual second-lien volume since 2007.
Borrower Profile
HELOAN borrowers tend to be well-qualified. According to the MBA's 2025 Home Equity Study (2024 data), the average HELOAN borrower has a FICO score of 749 and a combined loan-to-value (CLTV) ratio of 62% at closing, leaving substantial equity cushion. The average origination size is approximately $81,000, with credit unions reporting an average of $80,820 per loan.
Notably, Gen Z HELOAN growth was the strongest demographic segment in Q3 2025, rising 29% year-over-year, reflecting younger homeowners beginning to access the equity they've built in recent years.
Outlook
The structural drivers of HELOAN demand remain firmly in place: record tappable equity, rate lock-in suppressing cash-out refinances, and declining HELOAN rates making borrowing more attractive. TransUnion forecasts continued positive momentum in home equity originations through 2026, though growth rates may moderate from the 12–14% pace of 2025 as the market matures.
Key risks include a potential housing downturn that erodes equity cushions, or a sustained rise in long-term rates that pushes HELOAN costs back toward 9%. For now, the $562 billion HELOAN market appears well-positioned for further expansion, with conservative underwriting standards (62% CLTV, 749 FICO) providing a buffer against potential price declines.