After years of persistent inflation, the inflation rate has been dropping over the last few months — and the job market has taken a downward turn, too. Those changes have had a positive impact on the wider rate environment, but it may still be tough to find an affordable borrowing option right now. After all, the Federal Reserve’s benchmark rate remains locked at a 23-year high, which is keeping borrowing rates elevated.  

As a result, borrowers are paying a lot more to utilize lending tools like credit cards or personal loans. Right now, the average personal loan rate is 12.35%, up from an average of 8.73% in May 2022. Credit card rates are even higher at an average of nearly 23%, the highest on record. So, opting for one of these shorter-term borrowing options can be quite costly now.

If you’re a homeowner, though, there is one option worth considering: your home equity. Home equity borrowing is one of the most cost-effective options in today’s high-interest-rate environment, with home equity loan rates averaging just 8.52% currently. But just how much home equity does the average homeowner have right now — and how can it be leveraged? That’s what we’ll detail below.

See what home equity loan interest rate you’re eligible for online today.

How much home equity does the average homeowner have now?

There has been a significant increase in home equity levels across the nation over the last few months, according to the August 2024 ICE Mortgage Monitor report. As of the second quarter of 2024, homeowners nationwide had collectively amassed $11.5 trillion in tappable equity — the highest level ever recorded. This figure represents a 4% increase from the previous quarter and a 9.2% rise year-over-year.

The average homeowner’s financial stake in their property has also reached new heights. In Q2 2024, the average homeowner’s equity stake climbed to $327,000, an increase of about $28,000 compared to February 2024. The average homeowner’s accessible equity — which is the amount that can be accessed while maintaining a healthy 20% equity cushion — now amounts to $214,000, an uptick of about 11% comparatively. 

About 90% (or approximately 48.5 million homeowners) also have some degree of equity available for withdrawal while maintaining a combined loan-to-value (CLTV) ratio of 80% or lower, the report shows. And, three out of every five U.S. mortgage holders have accumulated at least $100,000 in tappable equity. 

Even more striking, though, is the upper end of the spectrum. About 4.6 million mortgage holders now have a minimum of $500,000 in accessible equity, while nearly 1.2 million homeowners have crossed the million-dollar mark.

What this shows is that the majority of homeowners across the nation currently have a powerful borrowing tool to utilize in an otherwise challenging economic environment. Whether it’s for home improvements, debt consolidation or other financial needs, this home equity can provide a potential source of funds for millions of Americans.

Find out what home equity borrowing rates you could qualify for here.

The best home equity tapping options right now

Given the current economic landscape, homeowners looking to access their equity should carefully consider their options. Here are some of the most advantageous ways to tap into home equity in today’s market:

• Home equity line of credit (HELOC): A HELOC functions as a line of credit and allows homeowners to borrow as needed up to a predetermined limit, making it ideal for ongoing expenses or projects with uncertain costs. HELOC rates are variable, making them a smart option to consider if you expect rates to decline in the future.
• Home equity loan: A home equity loan provides borrowers with a lump sum loan payment and a fixed interest rate. This option is typically most suitable for homeowners who need a large amount of money for a one-time expense and prefer predictable monthly payments.
• Cash-out refinance: A cash-out refinance allows homeowners to refinance their existing mortgage for more than they owe and take the difference in cash. While this option might be less attractive right now due to high mortgage rates, it could still be beneficial for homeowners who purchased their homes when rates were at their peak. 

When considering these options, it’s important to weigh factors such as interest rates, fees, tax implications and your long-term financial goals. It’s also crucial to consider why you’re tapping into home equity, as that can have an impact on which option is the best fit.

The bottom line

The average homeowner is currently sitting on a significant amount of home equity — about $327,000 in total, with about $214,000 worth of accessible equity, on average. This financial resource, when used wisely, can be a smart tool in today’s economy, providing a buffer against economic uncertainties, funding important life expenses or serving as a stepping stone to achieving broader financial goals. Before you borrow against it, though, make sure to do your research and determine the strategy that aligns with your unique circumstances and objectives.