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HELOCs in 2021-2023: A Comprehensive Analysis of Borrower Numbers, Payment Increases, Interest Rates, and Outlook

Home equity lines of credit (HELOCs) have gained significant popularity as a financial tool among homeowners in recent years. HELOCs provide homeowners with the ability to borrow money against the equity in their homes, offering flexibility and numerous possibilities for various purposes, including home improvements, debt consolidation, or significant expenses.

Number of Borrowers

According to data from the Federal Reserve, the number of outstanding HELOCs experienced a 15% year-over-year increase in 2021. Several factors contributed to this surge in HELOC borrowing:

  1. Favorable interest rates: In 2021, HELOCs continued to benefit from low-interest rates, making them an appealing option for homeowners seeking funds.
  2. Increasing home prices: The rising value of homes has resulted in greater equity availability for homeowners. This increased equity has made HELOCs more accessible and attractive.
  3. Economic recovery: As the economy recovered from the impact of the COVID-19 pandemic, consumer spending increased. This surge in spending generated a demand for HELOCs to finance home improvements and other significant purchases.

Payment Increases

As the number of HELOC borrowers increased in 2021 and 2022, the monthly payments for these loans also saw an upward trend. Data from the Federal Reserve reveals that the average monthly payment on a HELOC rose by 5% year-over-year in 2021 and an additional 2% in 2022. This increase can be attributed to several factors:

  1. Rising interest rates: HELOCs come with variable interest rates that can change over time. With interest rates on the rise in recent years, borrowers experienced higher monthly payments on their HELOCs.
  2. Changes in borrowing limits: Lenders have been raising borrowing limits on HELOCs, leading to higher monthly payments for certain borrowers.
  3. Repayment terms: HELOCs typically consist of a draw period of 10 years, followed by a repayment period of 20 years. As borrowers transition from the draw period to the repayment period, their monthly payments naturally increase.

Interest Rates

In 2023, interest rates are expected to continue rising, putting further pressure on HELOC payments. As of June 8, 2023, the average HELOC interest rate stands at 8.48%, a significant increase from 5.99% in January 2023.


The outlook for HELOCs in 2023 and beyond remains uncertain. The ongoing rise in interest rates diminishes the attractiveness of HELOCs for potential borrowers, and the economic landscape presents uncertainties. Nevertheless, HELOCs can still serve as a valuable tool for homeowners in need of quick and easy access to cash. However, borrowers considering a HELOC should proceed cautiously and take the following tips into account:

  1. Shop around for the best interest rate: HELOC interest rates vary among lenders, so it is crucial to compare rates and explore multiple options before making a decision.
  2. Compare borrowing limits: Different lenders offer different borrowing limits for HELOCs. It is important to assess and compare these limits to find the most suitable option.
  3. Understand the repayment terms: Familiarize yourself with the repayment terms of a HELOC. The draw period typically spans 10 years, followed by a repayment period of 20 years. Understanding these terms is essential before committing to a HELOC.
  4. Affordability of monthly payments: HELOC payments can be substantial, so it is vital to ensure that you can comfortably afford the monthly payments before proceeding with an application.

HELOCs present an excellent opportunity for homeowners to access funds for home improvements, debt consolidation, and other significant expenses. However, it is crucial to carefully evaluate the risks and benefits before applying for a HELOC.


1. Can I use a HELOC for purposes other than home improvements?

Yes, HELOCs offer flexibility, and the funds obtained can be used for various purposes, including debt consolidation, educational expenses, or even starting a business. However, it is advisable to consult with a financial advisor to determine the best use of the funds based on your individual circumstances.

2. How does a HELOC differ from a home equity loan?

While both HELOCs and home equity loans allow homeowners to borrow against their home’s equity, they differ in terms of the borrowing structure. A home equity loan provides a lump sum of money upfront, while a HELOC acts as a revolving line of credit that can be drawn upon as needed over a specified period. HELOCs offer greater flexibility but require careful financial management to avoid excessive debt.

3. Are there any risks associated with HELOCs?

Like any financial product, HELOCs come with potential risks. One of the key risks is the possibility of a decrease in home values, which could result in negative equity, making it challenging to sell the property without incurring a loss. Additionally, failing to make timely payments on a HELOC can lead to foreclosure. It is essential to assess your financial situation and obligations before committing to a HELOC and ensure you have a well-defined repayment plan in place.

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